On January 1, 2017, Procise Corporation acquired 100 percent of the outstanding voting stock of Gauge Rite Corporation for $2,026,600 cash. On the acquisition date, GaugeRite had the following balance sheet: Cash Accounts receivable Land Equipment (net) $ 75,000 118,000 767,000 1,932,000 $ 2,892,000 Accounts payable Long-term debt Common stock Retained earnings $ 169,000 1,018,000 1,022,000 683,000 $ 2,892,000 At the acquisition date, the following allocation was prepared: $ 2,026,600 1,705,000 321,600 Fair value of consideration transferred Book value acquired Excess fair value over book value To in-process research and development To equipment (8-year remaining life) To goodwill indefinite life) $ 58,000 113,600 171,600 150,000 Although at acquisition date Procise had expected $58,000 in future benefits from GaugeRite's in-process research and development project, by the end of 2017, it was apparent that the research project was a failure with no future economic benefits. On December 31, 2018, Procise and GaugeRite submitted the following trial balances for consolidation. There were no intra-entity payables on that date. Sales Cost of goods sold Depreciation expense Other operating expenses Subsidiary income Net income Retained earnings 1/1/18 Net income Dividends declared Retained earnings 12/31/18 Cash Accounts receivable Inventory Investment in GaugeRite Land Equipment (net) Goodwill Total assets Accounts payable Long-term debt Common stock Retained earnings 12/31/18 Total liabilities and equity Procise $ (3,851,950) 1,700,000 329,000 219,750 (196,800) $ (1,800,000) $ (3,062,500) (1,800,000) 100,000 $ (4,762,500) $ 103,350 889,000 990,000 2,373,650 3,652,500 5,087,500 371,000 $ 13,467,000 $ (262,000) $ (3,292,500) (5,150,000) (4,762,500) $(13,467,000) Gauge Rite $ (1,187,000) 815,000 129,000 32,000 0 $ (211,000) $ (931,000) (211,000) 25,550 $ (1,116,450) $ 51,450 221,000 752,000 0 721,000 1,710,000 0 $ 3,455,450 $ (455,000) $ (862,000) (1,022,000) (1,116,450) $ (3,455,450) a. Show how Procise derived its December 31, 2018, Investment in GaugeRite account balance. c. Prepare a consolidated worksheet for Procise and GaugeRite as of December 31, 2018. Show how Procise derived its December 31, 2018, Investment in GaugeRite account balance. (Amounts to be deducted should be indicated by a minus sign.) $ 2,026,600 Consideration transferred 1/1/17 Increase in GaugeRite's retained earnings to 1/1/18 In-process R&D write-off in 2017 Amortizations 2017 Income 2018 Dividends declared 2018 Amortization 2018 Investment balance 12/31/18 $ 2,026,600 Accounts Debit Credit Consolidated Totals Sales Cost of goods sold Depreciation expense Other operating expenses Subsidiary income Net Income 12/31/18 12/31/18 Procise GaugeRite $ (3,851,950) $ (1,187,000) 1,700,000 815,000 329,000 129,000 219,750 32,000 (196,800) 0 $ (1,800,000) $ 211,000 $ 0 0 Retained earnings 1/1/18 Net Income Dividends declared Retained earnings 12/31/18 $ (3,062,500) $ (931,000) (1,800,000) (211,000) 100,000 25,550 $ (4,762,500) $ (1,116,450) $ 0 Cash Accounts receivable Inventory Investment in GaugeRite Land Equipment (net) Goodwill Total assets $ 103,350 $ 51,450 889,000 221,000 990,000 752,000 2,373,650 0 3,652,500 721,000 5,087,500 1,710,000 371,000 0 $ 13,467,000 $ 3,455,450 $ 0 Accounts payable Long-term debt Common stockProcise Common stock-GaugeRite Retained earnings 12/31/18 $ (262,000) $ (455,000) (3,292,500) (862,000) (5,150,000) (1,022,000) (4,762,500) (1,116,450) S/13467000 $13.455 4501 0 Tatal liabilities and equit 0 On January 1, 2017, Procise Corporation acquired 100 percent of the outstanding voting stock of Gauge Rite Corporation for $2,026,600 cash. On the acquisition date, GaugeRite had the following balance sheet: Cash Accounts receivable Land Equipment (net) $ 75,000 118,000 767,000 1,932,000 $ 2,892,000 Accounts payable Long-term debt Common stock Retained earnings $ 169,000 1,018,000 1,022,000 683,000 $ 2,892,000 At the acquisition date, the following allocation was prepared: $ 2,026,600 1,705,000 321,600 Fair value of consideration transferred Book value acquired Excess fair value over book value To in-process research and development To equipment (8-year remaining life) To goodwill indefinite life) $ 58,000 113,600 171,600 150,000 Although at acquisition date Procise had expected $58,000 in future benefits from GaugeRite's in-process research and development project, by the end of 2017, it was apparent that the research project was a failure with no future economic benefits. On December 31, 2018, Procise and GaugeRite submitted the following trial balances for consolidation. There were no intra-entity payables on that date. Sales Cost of goods sold Depreciation expense Other operating expenses Subsidiary income Net income Retained earnings 1/1/18 Net income Dividends declared Retained earnings 12/31/18 Cash Accounts receivable Inventory Investment in GaugeRite Land Equipment (net) Goodwill Total assets Accounts payable Long-term debt Common stock Retained earnings 12/31/18 Total liabilities and equity Procise $ (3,851,950) 1,700,000 329,000 219,750 (196,800) $ (1,800,000) $ (3,062,500) (1,800,000) 100,000 $ (4,762,500) $ 103,350 889,000 990,000 2,373,650 3,652,500 5,087,500 371,000 $ 13,467,000 $ (262,000) $ (3,292,500) (5,150,000) (4,762,500) $(13,467,000) Gauge Rite $ (1,187,000) 815,000 129,000 32,000 0 $ (211,000) $ (931,000) (211,000) 25,550 $ (1,116,450) $ 51,450 221,000 752,000 0 721,000 1,710,000 0 $ 3,455,450 $ (455,000) $ (862,000) (1,022,000) (1,116,450) $ (3,455,450) a. Show how Procise derived its December 31, 2018, Investment in GaugeRite account balance. c. Prepare a consolidated worksheet for Procise and GaugeRite as of December 31, 2018. Show how Procise derived its December 31, 2018, Investment in GaugeRite account balance. (Amounts to be deducted should be indicated by a minus sign.) $ 2,026,600 Consideration transferred 1/1/17 Increase in GaugeRite's retained earnings to 1/1/18 In-process R&D write-off in 2017 Amortizations 2017 Income 2018 Dividends declared 2018 Amortization 2018 Investment balance 12/31/18 $ 2,026,600 Accounts Debit Credit Consolidated Totals Sales Cost of goods sold Depreciation expense Other operating expenses Subsidiary income Net Income 12/31/18 12/31/18 Procise GaugeRite $ (3,851,950) $ (1,187,000) 1,700,000 815,000 329,000 129,000 219,750 32,000 (196,800) 0 $ (1,800,000) $ 211,000 $ 0 0 Retained earnings 1/1/18 Net Income Dividends declared Retained earnings 12/31/18 $ (3,062,500) $ (931,000) (1,800,000) (211,000) 100,000 25,550 $ (4,762,500) $ (1,116,450) $ 0 Cash Accounts receivable Inventory Investment in GaugeRite Land Equipment (net) Goodwill Total assets $ 103,350 $ 51,450 889,000 221,000 990,000 752,000 2,373,650 0 3,652,500 721,000 5,087,500 1,710,000 371,000 0 $ 13,467,000 $ 3,455,450 $ 0 Accounts payable Long-term debt Common stockProcise Common stock-GaugeRite Retained earnings 12/31/18 $ (262,000) $ (455,000) (3,292,500) (862,000) (5,150,000) (1,022,000) (4,762,500) (1,116,450) S/13467000 $13.455 4501 0 Tatal liabilities and equit 0