Part A: Cain Corp acquired all of the outstanding S10 par value voting common stock of Frey, Inc. on January 1, Year 5. in exchange for 25.000 shares of its 10 par value voting common stock On December 31 Year 4. Cain's common stock had a closing market price of $30 per share on a national stock exchange. The acquisition was appropriately accounted for as a purchase. Both companies continued to operate as separate business entities maintaining separate accounting records with years ending December 31 On December 31, Years, the companies had condensed financial statements as follows Cair Corp Frey, Inc Dr. Dr. C. Income Statement Net sales S(3,800,000) 5(1.500.000) Dividends from Rey (40.000 Gain on sale of warehouse (30,000) Cost of goods sold 2.360,000 70.000 Operating expenses (including depreciation) 1.100.000 440.000 Net income 5.410.000 S090.000 Reamed Earnings Slutem Balance, 1//YRS $(440,000) S(156.0001 Net income (190.000) Dividends pard 40.000 Balance, 12/31/YRS STESSO S3060) (410.000) Balance Sheer Assets Cash Accounts receivable (net) Inventories Land plant and cuuipment Accumulated depreciation Investment in Frey (at cost) Total assets S 570.000 860,000 1.060,000 1.320.000 (370.000) 750,000 $4.190,00 $ 150.000 350 000 410.000 680.000 (210.000) 51 380.000 Liabilities and Stockholders' Equity Accounts payable and accrued expenses Common stock (510 par Additional paid-in capital Retained earnings Total liabilities and stockholders' equity SEI 340.000 (1.700.000 (300.000) 850.000) S (594000) (400.000) (80,000) 6306.000) ( S14 100.00 SULINO Additional information follow There were no changes in the common stock and additional paid-in capital accounts during Year 5 except the one necessitated by Caitl's acquisition of Frey. . At the acquisition date, the fair value of Frey's machinery exceeded as book value by 554.000. The excess cost will be anottized over the estimated average remaining life of six years. The fair values of all of Frey's other assets and liabilities were equal to their book values. An impairment test at the end of the year indicated that goodwill had lost $3,000 of its value On July 1 Year 5. Cain sold a warehouse facility to Frey for $129,000 cash. At the date of sale, Cain's book values were $33.000 for the land and 566,000 for the undepreciated cost of the building. Based on a real estate . appraisal, Frey allocated 543,000 of the purchase price to land and 586,000 to building Frey is depreciating the building over its estimated five-year remaining useful life by the straight-line method with no salvage value During Year 5. Cain purchased merchandise from Frey at an aggregate invoice pnce of $180,000, which included a 100% markup on Frey's cost At December 31, Year 5. Cain owed Frey 586,000 on these purchases, and $36.000 of this merchandise remained in Calin's inventory Required: Complete the following worksheet that would be used to prepare a consolidated income statement and a consolidated retained earnings statement for the year ended December 31, Year 5, and a consolidated balance sheet as of December 31, Year 5 Formal consolidated statements and adjusting entries are not required Ignore income tax considerations Supporting computations should be in good form Cam Corp. and Subsidiary CONSOLIDATING STATEMENT WORKSHEET December 31, Years Cam Corp Foto Ad Em Dr. Dr. (3,800,000) (1.500,000) 140.00 (30000) 2360000 $70,00 Adil Balance Income Swew Net als Dividends from Frey Gain on sale of warelice Costos sold Operating peres including depresia 1.100.000 140.000 Nel com (41000) ( (190.000) Read Earnings Sale Balance 1/1/YR Net income Duvides paid 40,000) (410,00 (156,000 (190,000 40,000 (850.000) 1306.000) Balance 12/31/YRS Balance Sheer Assets Cash Accounts receivable fact ) mos Land plant and equipment Accumulated depreciation Investment in Most 570.000 800.000 1,060,000 1. 120.000 (370 000 750 000 150,000 350.000 4100 680 (210,000) 4.190.000 1.350.000 Total Assets Lublis&Stockholders' Fiquity Accounts payable & accrued expense Commee stock isto pari Additional paid in capital Retained cannings (1340,000 (1.700.0001 ( (300.000 ) 850 000) (591000 () (40000 (80.000) (306) Total Liabilities Suckholders' Equity (4.190,000) (1380,000)