On January 1, 2019, Parrot Company acquired 100% of Sun Company in exchange for $2,000,000. Half of this total amount was paid in cash; the other half paid by issuing 50,000 shares of Parrot's stock valued at $20 per share to the Sun shareholders. Sun's book value on the acquisition date was $800,000; however Equipment with a 10-year life was undervalued by $150,000. Also, Sun held a patent valued at $700,000, although there was no book value for this asset because the cost of developing the patent had been expensed as R&D when incurred. The patented technology was expected to produce revenues for 5 years. Any remaining excess of the fair value of the acquisition over the fair value of identifiable assets and liabilities was attributed to Goodwill. Download the "Test #2 Consolidation Template" file above and on that template prepare the following as of December 31, 2021: 1. The "Fair Value Analysis" which determines the total fair value of the acquisition, and then allocates this amount to the fair value of the specific assets and liabilities acquired. 2. The consolidating Journal Entries necessary to complete the Consolidation Worksheet, and 3. The Consolidation Worksheet as of December 31, 2021. A B 1 Acquisition Details: Date 1/1/2019 2 3 Part 1. Fair Value Analysis 4 Fair Value of Consideration Transferred: 5 6 Cash Stock 7 Total Fair Value 8 Book Value of Subsidiary Acquired 9 Payment in Excess of Book Value 10 Attributed to Specific Assets: 11 12 13 14 15 Remainder - Goodwill 16 17 18 Part 2. Consolidating Journal Entries: D E F G H J K L M Life Amortization #DIV/O! #DIV/O! #DIV/O! A B D E F G H J K L M 18 Part 2. Consolidating Journal Entries: 19 S - To Eliminate Subsidiaries Beginning Book Value 20 21 22 23 24 25 A-To allocate excess of fair value over book value: 26 27 28 29 30 31 - To Eliminate Income recorded by Parent 32 33 34 35 D-To Eliminate Dividends Received by Parent Exhibit 3.7 + E - To Amortize Excess of Fair Value over Book Value of Assets Acquired: Part 3. Consolidation Worksheet Parrot Sun Consolidating Entries Debit Credit Consolidated Totals (4,000,000) (1,850,000) (5,850,000) Income Statement Revenues Cost of Goods Sold 2,150,000 1,290,000 Depreciation Exp. 425,000 210,000 Amortization Exp. 125,000 Equity in Subsidiary Earnings (195,000) Net Income (1,495,000) (350,000) 3,440,000 635,000 125,000 (195,000) (1,845,000) Statement of R/E Retained Earnings - Beg (2,000,000) (710,000) (2,710,000) Net income (Above) (1,495,000) (350,000) Dividends 400,000 75,000 Retained Earnings - End (3,095,000) (985,000) (1,845,000) 475,000 (4,080,000) Balance Sheet Cash 75,000 75,000 150,000 Accounts Receivable 130,000 186,000 316,000 Inventory 395,000 323,000 718,000 Investment in Sun 2,220,000 2,220,000 Land 555,000 471,000 1,026,000 Equipment (Net) 750,000 480,000 1,230,000 Patents 250,000 250,000 Goodwill Goodwill Total Assets 4,375,000 1,535,000 5,910,000 Accounts Payable (100,000) (50,000) (150,000) Long Term Debt (500,000) (500,000) Common Stock (35,000) (50,000) (85,000) APIC (645,000) (450,000) (1,095,000) Retained Earnings (3,095,000) (985,000) (4,080,000) Total Liab & S/E (4,375,000) (1,535,000) (5,910,000)