On January 1, 2019, Pace Company issued common stock with a fair value of $1,000,000 plus paid cash of $1,280,000 for 60% of Setter Corporation's outstanding common stock. At that date, the fair value of Setters noncontrolling interest was $1,520,000 and Setter's book value of net assets was $3,400,000. Setter had developed a customer list that was not recorded on its books but had an acquisition-date fair value of $200,000. At the date of acquisition, the customer list was expected to have a life of 20 years. The buildings and equipment were considered to be undervalued by $120,000 and to have a 15 year remaining life. All of those assets are still in operation at the end of 2020. Notes payable owed by Setter have a maturity date of December 31, 2026, and had a market value on January 1, 2019, of $1,200,000 ($40,000 less than their carrying amount of $1,240,000). On February 15, 2019, Pace sold to Setter land with a book value of $240,000 for $400,000. Setter still owns the land at the end of 2020. For many years, Setter had supplied its patented dog, used for veterinary practitioners' training sets, to Pace for use in Paces' medical product line. The companies expect to achieve synergies with production scheduling and product development through this business combination. In 2019, Setter shipped inventory costing $400,000 to Pace for $600,000; in 2020, the intercompany sales rose to $800,000 for goods costing $560,000. At year-end 2019, $120,000 of the goods were still in Pace's inventory; at year-end 2020, $160,000 of the goods from 2020 intercompany sales were still in Pace's inventory. Pace owes Setter $80,000 at the end of 2020. 1. Analysis of the investment by Pace Co. in Setter Corp. at January 1, 2019. 2. Equity method entries to account for the investment for the year 2020. Use cell referencing from the analysis of the investment when appropriate. 3. Consolidation entries in journal entry format for the year 2020. Again cross reference to the analysis of the investment when appropriate. 4. Consolidation worksheet for the year 2020. Be sure to cross reference from the consolidation entries into the worksheet. 5. A classified balance sheet at December 31, 2020 and a multi-step income statement for the year ended December 31, 2020 in good form. Be sure to cross reference from the consolidation worksheet to the financial statements. Pace Company and Setter Corp. Separate Company Trial Balances 31-Dec-20 Pace Setter $ (3,200,000) $ (2,000,000) 2,000,000 1,200,000 Sales Cost of Goods Sold Operating Expenses Selling, General & Administrative Depreciation & Amortization Interest Expense Equity in Earnings of Stork Net Income 195,800 130,400 55,200 (317,400) $ (1,136,000) $ 110,000 80,000 50,000 (560,000) Retained Earnings, January 1 Net Income Dividends Declared and Paid Retained Earnings, December 31 (4,464,000) (2,480,000) (1,136,000) (560,000) 460,000 240,000 $ (5,140,000) $ (2,800,000) $ $ 360,000 1,640,000 1,280,000 Cash Accounts Receivable Inventory Investment in Stork Land Buildings and Equipment (net) Total Assets 924,400 1,424,000 1,760,000 2,687,600 720,000 1,984,000 9,500,000 1,560,000 1,200,000 $ 6,040,000 $ Liabilities Accounts Payable Long Term Notes Payable $ (480,000) $ (360,000) (1,440,000) (1,240,000) Stockholders' Equity Common Stock Additional Paid-In Capital Retained Earnings Total Liabilities and Stockholders' Equity (2,440,000) (1,280,000) (360,000) (5,140,000) (2,800,000) $ (9,500,000) $ (6,040,000) On January 1, 2019, Pace Company issued common stock with a fair value of $1,000,000 plus paid cash of $1,280,000 for 60% of Setter Corporation's outstanding common stock. At that date, the fair value of Setters noncontrolling interest was $1,520,000 and Setter's book value of net assets was $3,400,000. Setter had developed a customer list that was not recorded on its books but had an acquisition-date fair value of $200,000. At the date of acquisition, the customer list was expected to have a life of 20 years. The buildings and equipment were considered to be undervalued by $120,000 and to have a 15 year remaining life. All of those assets are still in operation at the end of 2020. Notes payable owed by Setter have a maturity date of December 31, 2026, and had a market value on January 1, 2019, of $1,200,000 ($40,000 less than their carrying amount of $1,240,000). On February 15, 2019, Pace sold to Setter land with a book value of $240,000 for $400,000. Setter still owns the land at the end of 2020. For many years, Setter had supplied its patented dog, used for veterinary practitioners' training sets, to Pace for use in Paces' medical product line. The companies expect to achieve synergies with production scheduling and product development through this business combination. In 2019, Setter shipped inventory costing $400,000 to Pace for $600,000; in 2020, the intercompany sales rose to $800,000 for goods costing $560,000. At year-end 2019, $120,000 of the goods were still in Pace's inventory; at year-end 2020, $160,000 of the goods from 2020 intercompany sales were still in Pace's inventory. Pace owes Setter $80,000 at the end of 2020. 1. Analysis of the investment by Pace Co. in Setter Corp. at January 1, 2019. 2. Equity method entries to account for the investment for the year 2020. Use cell referencing from the analysis of the investment when appropriate. 3. Consolidation entries in journal entry format for the year 2020. Again cross reference to the analysis of the investment when appropriate. 4. Consolidation worksheet for the year 2020. Be sure to cross reference from the consolidation entries into the worksheet. 5. A classified balance sheet at December 31, 2020 and a multi-step income statement for the year ended December 31, 2020 in good form. Be sure to cross reference from the consolidation worksheet to the financial statements. Pace Company and Setter Corp. Separate Company Trial Balances 31-Dec-20 Pace Setter $ (3,200,000) $ (2,000,000) 2,000,000 1,200,000 Sales Cost of Goods Sold Operating Expenses Selling, General & Administrative Depreciation & Amortization Interest Expense Equity in Earnings of Stork Net Income 195,800 130,400 55,200 (317,400) $ (1,136,000) $ 110,000 80,000 50,000 (560,000) Retained Earnings, January 1 Net Income Dividends Declared and Paid Retained Earnings, December 31 (4,464,000) (2,480,000) (1,136,000) (560,000) 460,000 240,000 $ (5,140,000) $ (2,800,000) $ $ 360,000 1,640,000 1,280,000 Cash Accounts Receivable Inventory Investment in Stork Land Buildings and Equipment (net) Total Assets 924,400 1,424,000 1,760,000 2,687,600 720,000 1,984,000 9,500,000 1,560,000 1,200,000 $ 6,040,000 $ Liabilities Accounts Payable Long Term Notes Payable $ (480,000) $ (360,000) (1,440,000) (1,240,000) Stockholders' Equity Common Stock Additional Paid-In Capital Retained Earnings Total Liabilities and Stockholders' Equity (2,440,000) (1,280,000) (360,000) (5,140,000) (2,800,000) $ (9,500,000) $ (6,040,000)