Peace Corporation acquired 100 percent of Soft Inc. in a nontaxable transaction on December 31, 20X1. The following balance sheet information is available immediately following the transaction: Peace Corporation Book Value Fair Values $ 31,000 $ 31,000 57,000 57,000 77,000 84,000 10,000 84,000 84,000 165,000 200,000 Soft Inc. Book Value Fair Values $ 9,000 $ 9,000 14,000 14,000 4,000 10,000 4,000 ? 30,000 43,000 27,000 Cash Accounts Receivable, net Inventory Deferred Tax Asset Investment in Soft Equipment, net Patent Total Assets ola Accounts Payable Accrued Vacation Payable Deferred Tax Liability Long-Term Debt Common Stock Retained Earnings Total Liabilities and Equity $61,000 $12,000 $12,000 $ 58,000 14,000 $424,000 $ 58,000 14,000 6,000 110,000 140,000 96,000 $424,000 120,000 9,000 3,000 9,000 9,000 28,000 $61,000 Additional Information 1. The current and future effective tax rate for both Peace and Soft is 40 percent. 2. The recorded deferred tax asset for Peace relates to the book-tax differences arising from the allowance for doubtful Accounts and the Accrued vacation payable. The expenses associated with each of these amounts will not be deductible for tax purposes until the related accounts receivable are written off or until the employee vacation is actually paid out. 3. The recorded deferred tax asset for Soft is related solely to the book-tax difference arising from the allowance for doubtful accounts. 4. The recorded deferred tax liability in both Peace and Soft relates solely to the book-tax differences arising from the depreciation of their respective equipment. 5. Accumulated depreciation on the financial accounting records of Peace and Soft is $48,000 and $19,000, respectively. 6. The Soft patent was identified by Peace in the due diligence process and has not previously been recorded in the accounting records of Soft. 7. The book and tax bases of all other assets and liabilities of Peace and Soft are the same. c. Prepare all of the consolidation entries needed to prepare the worksheet for Peace and Soft at the date of acquisition. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Answer is not complete. No Event Accounts Debit Credit A 1 Common stock Retained earnings Investment in Soft Corporation 9,000 28,000 37,000 B 2 Inventory Equipment Patent Goodwill Investment in Soft Corporation Deferred tax liability OOO OOOOOO OO 3 Accumulated depreciation Equipment d. Prepare the consolidation worksheet for Peace and Soft at the date of acquisition. (Values in the first two columns (the "parent" and "subsidiary" balances) that are to be deducted should be indicated with a minus sign, while all values in the "Consolidation Entries" columns should be entered as positive values. For accounts where multiple adjusting 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.) X Answer is not complete. PEACE CORPORATION AND SUBSIDIARY Consolidation Balance Sheet Worksheet December 31, 20X1 Consolidation Entries Peace Soft Co. DR CR Corp. Consolidated $ 31.000 $ $ 57,000 77,000 10,000 9,000 14,000 4,000 4,000 40,000 71,000 81,000 14,000 Balance Sheet Cash Accounts receivable Inventory Deferred tax asset Equipment Less: Accumulated depreciation Investment in Soft Patent Goodwill Total Assets (48,000) (19,000) (67,000) 27,000 > 27,000 $ 127,000 $ 12,000 $ 27,000 1$ 0 $ 166,000 12.000 $ 70,000 14,000 9.000 Liabilities & Stockholders' Equity Accounts payable Accrued vacation payable Deferred tax liability Long-term debt Common stock Retained earnings Total Liabilities & Equity 58,000 $ 14.000 6,000 110,000 140,000 96,000 $ 424,000 $ 3,000 9,000 9,000 28,000 61,000 119.000 149,000 124,000 485.000 $ 0 $ 0 $