Pep Corporation acquired 100 percent of See Company stock on January 1, 2019 for $893,000 cash. $ SEE COMPANY Debit Credit 320,500 204,000 175,000 Following are trial balances of Pep Corporation and See Company as of December 31, 2019 PEP CORPORATION Debit Credit Cash 373,000 Accounts Receivable 294,000 Inventory 473,000 Investment in See Corp. 1,140,000 Buildings 625,000 Land 790,000 Equipment 481,000 Cost of Goods Sold 382,000 Depreciation Expense, Building 37,000 Depreciation Expense, Equipment 48,000 Selling & Administrative Expense 273,000 Dividends Declared 60,000 Accumulated Depreciation, Bldg 185,000 Accumulated Depreciation, Equip 144,000 Accounts Payable 118,000 Bonds Payable 500,000 Common Stock ($1 par) 600,000 Additional Paid In Capital 1,416,000 Retained Earnings (01/01/2019) 774,000 Sales 942,000 Income from See Corp. 297,000 $ 4,976,000 $ 4,976,000 360,000 225,000 233,000 110,100 18,600 31,200 99,000 50,000 $ 111,600 156,000 165,800 120,000 284,000 125,000 291,000 573,000 $ 1,826,400 $ 1,826,400 Additional Information: 1. On January 1, 2019 the fair market value of See's assets equaled their book value with the exception of: Inventory-was overvalued by $8,000 (all of this inventory was sold during 2019). Building - was overvalued by $21,000 (remaining useful life was estimated to be 14 years). Land - was by undervalued $68,000. Equipment-was undervalued by $70,000 (remaining useful life was estimated to be 5 years). The new Goodwill from the acquisition was impaired by $12,600 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 2019 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 es 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) Goodwill (if any) b. Recreate the 4 JOURNAL ENTRIES recorded by Pep with regard to its investment in See Company at January 1, 2019 and during 2019. 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 12/31/19 balances for Pep Company's Investment in See and Income from See accounts. Use the accounts provided below. (4 POINTS) Pep Company's General Ledger 16 Income from See . . . d. Prepare the 3 REQUIRED CONSOLIDATION WORKSHEET ENTRIES (BCE, AEVRE, & EVRE) at December 31, 2019. (28 POINTS)
