Pep Corporation acquired 100 percent of See Company stock on January 1, 2018 for $860,400 cash. SEE COMPANY Debit Credit 223,900 204,000 116,000 Following are trial balances of Pep Corporation and See Company as of December 31, 2018: PEP CORPORATION Debit Credit Cash 1,325,600 Accounts Receivable 294,000 Inventory 473,000 Investment in See Corp. 1,030,370 Land 790,000 Buildings 625,000 Equipment 481,000 Cost of Goods Sold 382,000 Depreciation Expense, Building 51,000 Depreciation Expense, Equipment 48,000 Selling & Administrative Expense $ 209,000 Dividends Declared $ 60,000 Accumulated Depreciation, Bldg $ 204,000 Accumulated Depreciation, Equip $ 144,000 Accounts Payable 118,000 Bonds Payable $ 500,000 Common Stock 600,000 Additional Paid In Capital $ 2,300,000 Retained Earnings (01/01/2018) 769,000 Sales $ 919,000 Income from See Corp. $ 214,970 $ 5,768,970 $ 5,768,970 unnun 225,000 360,000 233,000 164,000 14,500 25,600 89,000 45,000 $ 116,000 128,000 65,000 120,000 127,000 223,000 400,000 521,000 $ 1,700,000 $ 1,700,000 Additional Information: 1. On January 1, 2018 the fair market value of See's assets equaled their book value with the exception of: Inventory - was undervalued by $12,500 (all of this inventory was sold during 2018). Land - was by overvalued $15,000. Building - was undervalued by $47,500 (remaining useful life was estimated to be 10 years). Equipment - was overvalued by $21,600 (remaining useful life was estimated to be 5 years). Any new Goodwill from the acquisition is not impaired at year-end. 2. Pep Corporation uses the (full) equity method to account for its Investment in See Company. 3. The general ledger numbers given above (HINT: those in boldface) include the effects of the JOURNAL ENTRIES that were recorded by Pep at the acquisition date and during 2018 to account for its investment in See Company. These boldface figures should be used a check figures in your solution. Required: (CLEARLY SHOW ALL OF YOUR WORK). a. Analyze the Investment in See account as of the acquisition date. Determine the total differential" and then break this amount out into the excess cost detail and (new) goodwill components. CLEARLY LABEL YOUR DETAIL. (10 POINTS) Fair Value of Consideration given from Pep Company to See's Shareholders: Fair Value of Any Noncontrolling Interest Total Fair Value Book Value of See Company's Net Identifiable Assets Differential (if any) Identifiable Excess (if any) New Goodwill (if any) b. Recreate the 4 JOURNAL ENTRIES recorded by Pep with regard to its investment in See Company at January 1, 2018 and during 2018. BE SURE TO SHOW YOUR WORK FOR THE NUMBERS INCLUDED IN THE AMORTIZATION OF EXCESS VALUE JOURNAL ENTRY. (10 POINTS) c. Using your information from b. above, calculate the 12/31/18 balances for Pep Company's Investment in See and Income from See accounts. Use the T accounts provided below. (4 POINTS) Pep Company's General Ledger Investment in See Income from See d. Prepare the 3 REQUIRED CONSOLIDATION WORKSHEET ENTRIES (BCE, AEVRE, & EVRE) at December 31, 2018. (28 POINTS) PEP CORPORATION AND SEE COMPANY Consolidation Worksheet For the Period Ending December 31, 2018 Consolidated PEP'S G/L SEE'S G/L CONSOLIDATION ENTRIES Debit Credit Totals $ $ Income Statement Sales Less: Cost of Goods Sold Less: Depreciation Expense, Building Less: Depreciation Expense, Equipment Less: Selling & Administrative Expense Income from See Corp. Net Income 919,000 (382,000) (51,000) (48,000) (209,000) 214,970 443.970 521,000 (164,000) (14,500) (25,600) (89,000) 227,900 Statement of Betained Earnings Retained Earnings (01/01/2018) Net income (above) Dividends Declared Retained eamings, 12/31/18 $ 769.000 443.970 (60,000) 1,152,970 $ $ $ $ 400,000 227.900 (45,000) 582.900 S $ $ Balance Sheet Cash Accounts Receivable Inventory Investment in See Corp. 1,325,600 294.000 473,000 1,030,370 $ $ $ 223,900 204.000 116,000 Land Buildings Equipment Accumulated Depreciation, Bldg Accumulated Depreciation, Equip Goodwill (NEW) Total Assets 790,000 625,000 481,000 (204,000) (144,000) $ $ 225,000 360,000 233,000 (116,000) (128,000) $ 4,670,970 $ 1,117,900 118,000 Accounts Payable Bonds Pavable Common Stock ($1 par) Additional Paid In Capital Retained earnings, 12/31/18 (above) Total Liabilities & Stockholders' Equity 600.000 2,300,000 1,152.970 4,670,970 $ $ $ $ $ 65.000 120.000 127.000 223,000 582.900 1.117.900 $ NET ASSETS ASSETS - LIABILITIES TOTAL STOCKHOLDERS' EQUITY Pep Corporation acquired 100 percent of See Company stock on January 1, 2018 for $860,400 cash. SEE COMPANY Debit Credit 223,900 204,000 116,000 Following are trial balances of Pep Corporation and See Company as of December 31, 2018: PEP CORPORATION Debit Credit Cash 1,325,600 Accounts Receivable 294,000 Inventory 473,000 Investment in See Corp. 1,030,370 Land 790,000 Buildings 625,000 Equipment 481,000 Cost of Goods Sold 382,000 Depreciation Expense, Building 51,000 Depreciation Expense, Equipment 48,000 Selling & Administrative Expense $ 209,000 Dividends Declared $ 60,000 Accumulated Depreciation, Bldg $ 204,000 Accumulated Depreciation, Equip $ 144,000 Accounts Payable 118,000 Bonds Payable $ 500,000 Common Stock 600,000 Additional Paid In Capital $ 2,300,000 Retained Earnings (01/01/2018) 769,000 Sales $ 919,000 Income from See Corp. $ 214,970 $ 5,768,970 $ 5,768,970 unnun 225,000 360,000 233,000 164,000 14,500 25,600 89,000 45,000 $ 116,000 128,000 65,000 120,000 127,000 223,000 400,000 521,000 $ 1,700,000 $ 1,700,000 Additional Information: 1. On January 1, 2018 the fair market value of See's assets equaled their book value with the exception of: Inventory - was undervalued by $12,500 (all of this inventory was sold during 2018). Land - was by overvalued $15,000. Building - was undervalued by $47,500 (remaining useful life was estimated to be 10 years). Equipment - was overvalued by $21,600 (remaining useful life was estimated to be 5 years). Any new Goodwill from the acquisition is not impaired at year-end. 2. Pep Corporation uses the (full) equity method to account for its Investment in See Company. 3. The general ledger numbers given above (HINT: those in boldface) include the effects of the JOURNAL ENTRIES that were recorded by Pep at the acquisition date and during 2018 to account for its investment in See Company. These boldface figures should be used a check figures in your solution. Required: (CLEARLY SHOW ALL OF YOUR WORK). a. Analyze the Investment in See account as of the acquisition date. Determine the total differential" and then break this amount out into the excess cost detail and (new) goodwill components. CLEARLY LABEL YOUR DETAIL. (10 POINTS) Fair Value of Consideration given from Pep Company to See's Shareholders: Fair Value of Any Noncontrolling Interest Total Fair Value Book Value of See Company's Net Identifiable Assets Differential (if any) Identifiable Excess (if any) New Goodwill (if any) b. Recreate the 4 JOURNAL ENTRIES recorded by Pep with regard to its investment in See Company at January 1, 2018 and during 2018. BE SURE TO SHOW YOUR WORK FOR THE NUMBERS INCLUDED IN THE AMORTIZATION OF EXCESS VALUE JOURNAL ENTRY. (10 POINTS) c. Using your information from b. above, calculate the 12/31/18 balances for Pep Company's Investment in See and Income from See accounts. Use the T accounts provided below. (4 POINTS) Pep Company's General Ledger Investment in See Income from See d. Prepare the 3 REQUIRED CONSOLIDATION WORKSHEET ENTRIES (BCE, AEVRE, & EVRE) at December 31, 2018. (28 POINTS) PEP CORPORATION AND SEE COMPANY Consolidation Worksheet For the Period Ending December 31, 2018 Consolidated PEP'S G/L SEE'S G/L CONSOLIDATION ENTRIES Debit Credit Totals $ $ Income Statement Sales Less: Cost of Goods Sold Less: Depreciation Expense, Building Less: Depreciation Expense, Equipment Less: Selling & Administrative Expense Income from See Corp. Net Income 919,000 (382,000) (51,000) (48,000) (209,000) 214,970 443.970 521,000 (164,000) (14,500) (25,600) (89,000) 227,900 Statement of Betained Earnings Retained Earnings (01/01/2018) Net income (above) Dividends Declared Retained eamings, 12/31/18 $ 769.000 443.970 (60,000) 1,152,970 $ $ $ $ 400,000 227.900 (45,000) 582.900 S $ $ Balance Sheet Cash Accounts Receivable Inventory Investment in See Corp. 1,325,600 294.000 473,000 1,030,370 $ $ $ 223,900 204.000 116,000 Land Buildings Equipment Accumulated Depreciation, Bldg Accumulated Depreciation, Equip Goodwill (NEW) Total Assets 790,000 625,000 481,000 (204,000) (144,000) $ $ 225,000 360,000 233,000 (116,000) (128,000) $ 4,670,970 $ 1,117,900 118,000 Accounts Payable Bonds Pavable Common Stock ($1 par) Additional Paid In Capital Retained earnings, 12/31/18 (above) Total Liabilities & Stockholders' Equity 600.000 2,300,000 1,152.970 4,670,970 $ $ $ $ $ 65.000 120.000 127.000 223,000 582.900 1.117.900 $ NET ASSETS ASSETS - LIABILITIES TOTAL STOCKHOLDERS' EQUITY