On January 1, 2017, Prestige Corporation acquired 100 percent of the voting stock of Stylene Corporation in exchange for $2,293,000 in cash and securities. On the acquisition date, Stylene had the following balance sheet: Accounts payable $ 1,889,900 Cash Accounts receivable Inventory Equipment (net) Trademarks $ 33,400 124,500 202,000 2,160,000 992,000 $ 3,511,900 Common stock Retained earnings 800,000 822,000 $ 3,511,900 At the acquisition date, the book values of Stylene's assets and liabilities were generally equivalent to their fair values except for the following assets: Asset Equipment Customer lists Trademarks Book Value $2,160,000 0 992,000 Fair Value $2,301,000 237,000 1,063,000 Remaining Useful Life 8 years 4 years indefinite During the next two years, Stylene has the following income and dividends in its own separately prepared financial reports to its parent. 2017 2018 Net Income Dividends $ 266,000 $ 25,000 394,000 45,000 Dividends are declared and paid in the same period. The December 31, 2018, separate financial statements for each company appear below. Parentheses indicate credit balances. Dividends are declared and paid in the same period. The December 31, 2018, separate financial statements for each company appear below. Parentheses indicate credit balances. Prestige Stylene $ (4,260,000) 2,330,000 538,000 117,000 (317, 125) $ (1,592,125) $(2,942,000) 2,080,000 468,000 0 0 $ (394,000) $ (3, 140,000) (1,592,125) 150,000 $ (4,582, 125) $(1,063,000) (394,000) 45,000 $(1,412,000) Income Statement Revenues Cost of goods sold Depreciation expense Amortization expense Equity earnings in Stylene Net income Statement of Retained Earnings Retained earnings 1/1 Net income (above) Dividends declared Retained earnings 12/31 Balance Sheet Cash Accounts receivable Inventory Investment in Stylene Equipment Customer lists Trademarks Goodwill Tot assets Accounts payable Common stock Retained earnings, 12/31 Total liabilities and equity $ $ 580,000 862,000 981,000 2,729, 250 6,040,000 191,000 2,660,000 221,000 $ 14,264, 250 $ (1,182,125) (8,500,000) (4,582, 125) $(14,264, 250) 84,000 108,500 574,000 0 1,867,500 0 1,038,000 $ 3,672,000 $(1,460,000) (800,000) (1,412,000) $(3,672,000) a. Determine the fair value in excess of book value for Prestige's acquisition date investment in Stylene. b. Determine Prestige's December 31, 2018, Investment in Stylene balance. c. Prepare a worksheet to determine the balances for Peregrine's December 31, 2018, consolidated financial statements. Required A Required B Required C Determine the fair value in excess of book value for Prestige's acquisition date investment in Stylene. Fair value in excess of book value Required A Required B > Required A Required B Required C Determine Prestige's December 31, 2018, Investment in Stylene balance. Investment in Stylene Required A Required C Sales $ (2,942,000) 2,080,000 468,000 Cost of goods sold Depreciation expense Amortization expense Equity earnings Net income $ (4,260,000) 2,330,000 538,000 117,000 (317,125) $ (1,592,125) 0 0 $ (394,000) Statement of Retained Earnings Retained earnings 1/1 Net income (above) (3,140,000) (1,592,125) 150,000 $ (4,582,125) (1,063,000) (394,000) 45,000 $ (1,412,000) Dividends declared Retained earnings 12/31 Balance Sheet Cash $ $ 580,000 862,000 Accounts receivable 84,000 108,500 574,000 0 Inventory Investment in Stylene Equipment (net) Customer lists 981,000 2,729,250 6,040,000 191,000 1,867,500 0 Trademarks 1,038,000 Goodwill 2,660,000 221,000 $ 14,264,250 $ 0 Total assets 3,672,000 (1,460,000) Accounts payable Common stock - Prestige (1,182,125) (8,500,000)
