Pecos Company acquired 100 percent of Sueros outstanding stock for $1,450,000 cash on 1/1/2014, when Suero had the following balance sheet:

Cash - $37,000 Liabilities - ($422,000)

Receivables - $82,000 Common Stock - ($350,000)

Inventory - $149,000 Retained Earnings - ($126,000)

land - $90,000 Total Liabilities and Equity - ($898,000)

Equipment (net) - $225,000

Software - $315,000

Total Assets - $898,000

At the acquisition date, the fair values of each identifiable asset and liability that differed from book value are:

Land - $80,000

Brand Name - $60,000 - indefinite life - unrecognized on Suaro's books

Software - $415,000 - 2 yr estimated useful life

In-Process R&D - $300,000

Additional Info:

1) Although at acquisition date Pecos expected future benefits from Suaro's in-process R&D, by the end of 2014, it became clear it was a failure with no future economic benefits.

2) During 2014, Suaro earns $75,000 and pays no dividends

3) Selected amounts form Pecos and Suaro's seperate financial statements at Dec 31, 2015, are presented in the consolidated information worksheet. All consolidate worksheets are to be prepared as of Dec 31, 2015

4) Pecos Jan 1, 2015, Retained Earnings balance - before any effect from Suaro's 2014 income - is ($930,000) (credit balance)

5) Pecos has 500,000 common shares outstanding EPS calculations and reported $2,943,100 for consolidated assets at the beginning of the period.

The following is the consoidated information worksheet:

A	B	C	D
Dec 31, 2015, Trial Balances
	Pecos	Suaro
Revenues	($1,052,000)	($427,000)
Operating Expenses	$821,000	$262,000
Goodwill Impairment Loss	?
Income from Suaro	?
Net Income	?	($165,000)
Retained Earnings - Pecos 1/1/15	?
Retained Earnings - Suaros 1/1/15		($201,000)
Net Income (Above)	?	($165,000)
Dividends Declared	$200,000	$35,000
Retained Earnings 12/31/15	?	($331,000)
Cash	$195,000	$95,000
Receivables	$247,000	$143,000
Inventory	$415,000	$197,000
Investment in Suaro	?
land	$341,000	$85,000
equipment	$240,100	$100,000
Software		$312,000
Other Intangibles	$145,000
Goodwill
Total Assets	?	$932,000
Liabilities	($1,537,100)	($251,000)
Common stock	($500,000)	($350,000)
Retained Earnings (Above)	?	($331,000)
Total Liabilities and Equity	?	($932,000)
Fair-Value allocation schedule
Price paid	$1,450,000
Book value	$476,00
Excess initial value	$974,000	Amortizations
to land	($10,000)	2014	2015
to brand name	$60,000	?	?
to software	$100,000	?	?
to IPR&D	$300,000	?	?
to goodwill	$524,000	?	?
Suaro's RE changes	Income	Dividends
2014	$75,000	$0
2015	$165,000	$35,000

A) Input the consolidated information worksheet provided and complete the fair-value allocation schedule by computing the excess amoritizations for 2014 and 2015.

B) Using separate worksheets, prepare Peco's trial balances for each of the indicated accounting methods (equity, initial value, and partial equity). Use only the formulas for the Investment in Suaro, the Income of Suaro, and Retained Earnings accounts.

C using Reference to other cells only (either from the consolidated information worksheet of from the separator method work sheets), Prepare for each of the three consolidation work sheet:

• Adjustments and eliminations
• Consolidated balance

D) calculate and present the effects of a 2021 total goodwill impairment loss on the following ratios for the consolidated entity

• Earnings per share
• Retune on assets return on equity
• Debt to equity

Your worksheets should have the capability to adjust immediately for the possibility that all acquisition goodwill can be considered impairment in 2021.

E) Prepare a report that describes and discusses the following worksheet results:

• The effect of alternative investment accounting methods on the parents trial balances and the final consolidations figures
• The relearn between consolidates retained earnings and the parents earnings under each of the three investment accounting methods
• The effect on eps, return on assets, return on equity, and debt-to- equity ratios of the recognition that all acquisition-related goodwill is considered impaired in 2021

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