On January 1, 2020, Prestige Corporation acquired 100 percent of the voting stock of Stylene Corporation in exchange for $2,231,500 in cash and securities. On the acquisition date, Stylene had the following balance sheet: Accounts payable $ 2,153,900 Cash Accounts receivable Inventory Equipment (net) Trademarks Total assets $ 42,400 125,500 222,000 2,430,000 950,000 $ 3,769,900 Common stock Retained earnings Total liabilities and equity 800,000 816,000 $ 3,769,900 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 $2,430,000 0 950,000 Fair Value $2,567,000 164,000 1,029,500 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. 2020 2021 Net Income Dividends $ 186,000 $25,000 478,000 45,000 Dividends are declared and paid in the same period. The December 31, 2021, separate financial statements for each company follow. Parentheses indicate credit balances. Prestige Stylene $ (4,680,000) 2,540,000 576,000 169,000 (419,875) $ (1,814,875) $(2,984,000) 2,110,000 396,000 0 0 $ (478,000) $ (3,550,000) $ (977,000) (1,814,875) (478,000) 150,000 45,000 $ (5,214,875) $(1,410,000) 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 Total assets Accounts payable Common stock Retained earnings, 12/31 Total liabilities and equity $ 572,000 $ 55,000 700,000 107,500 913,000 570,000 2,709, 250 0 6,530,000 1,980,000 190,000 0 3,400,000 914,000 174,000 0 $ 15,188,250 $ 3,626,500 $ (1,473,375) $(1,416,500) (8,500,000) (800,000) (5,214,875) (1,410,000) $(15,188,250) $(3,626,500) a. Determine the fair value in excess of book value for Prestige's acquisition date investment in Stylene. b. Determine Prestige's December 31, 2021, Investment in Stylene balance. c. Prepare a worksheet to determine the balances for Prestige's December 31, 2021, 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 C Determine Prestige's December 31, 2021, Investment in Stylene balance. Amounts Investment in Stylene Prepare a worksheet to determine the balances for Prestige's December 31, 2021, consolidated financial statements. (For accounts where multiple consolidation entries are required, combine all debit entries into one amount and enter this amount in the debit column of the worksheet. Similarly, combine all credit entries into one amount and enter this amount in the credit column of the worksheet. Input all amounts as positive values.) Show less PRESTIGE CORPORATION AND CONSOLIDATED SUBSIDIARY Consolidation Worksheet For Year December 31, 2021 Consolidation Entries Accounts Prestige Stylene Debit Credit Consolidated Totals Income Statement Sales $ (2,984,000) 2,110,000 396,000 Cost of goods sold Depreciation expense Amortization expense Equity earnings in Stylene $ (4,680,000) 2,540,000 576,000 169,000 (419,875) $ (1,814,875) 0 0 Net income $ (478,000) Statement of Retained Earnings Retained earnings 1/1 Net income (above) Dividends declared (3,550,000) (1,814,875) 150,000 $ (5,214,875) (977,000) (478,000) 45,000 $ (1,410,000) Retained earnings 12/31 Balance Sheet Cash Accounts receivable Inventory Investment in Stylene Equipment (net) Customer lists $ 572,000 $ 55,000 700,000 107,500 913,000 570,000 2,709,250 0 6,530,000 1,980,000 190,000 0 3,400,000 914,000 174,000 0 $ 15,188,250 $ 3,626,500 Trademarks Goodwill Total assets (1,416,500) (1,473,375) (8,500,000) Accounts payable Common stock - Prestige Common stock - Stylene Retained earnings 12/31 Total liabilities and equity (5,214,875) $ (15,188,250) (800,000) (1,410,000) $ (3,626,500)
