( Pep Corporation acquired 70 percent of See Company stock on January 1, 2019 for $570,500 cash. The fair market value of the 30 percent noncontrolling interest on this date was $244,500. SEE COMPANY Debit Credit 230,500 204,000 195,000 Following are trial balances of Pep Corporation and See Company as of December 31, 2019: PEP CORPORATION Debit Credit Cash $ 749,500 Accounts Receivable $ 294,000 Inventory $ 473,000 Investment in See Corp. $ 725,340 Buildings $ 625,000 Land $ 790,000 Equipment $ 481,000 Cost of Goods Sold $ 382,000 Depreciation Expense, Building $ 62,500 Depreciation Expense, Equipment $ 96,200 Selling & Administrative Expense $ 273,000 Dividends Declared $ 60,000 Accumulated Depreciation, Bldg $ 250,000 Accumulated Depreciation, Equip $ 288,600 Accounts Payable $ 118,000 Bonds Payable $ 500,000 Common Stock ($1 par) $ 600,000 Additional Paid In Capital $ 1,528,200 Retained Earnings (01/01/2019) $ 809,000 Sales $ 727,900 Income from See Corp. $ 189,840 $ 5,011,540 $ 5,011,540 $ $ $ $ $ $ $ $ $ $ $ $ 360,000 225,000 233,000 110,100 18,600 23,100 128,300 50,000 $ $ $ $ $ $ $ $ $ 1,777,600 $ 130,200 138,600 165,800 120,000 274,000 157,000 219,000 573,000 $ 1,777,600 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 $3,000 (all of this inventory was sold during 2019). Building - was undervalued by $48,000 (remaining useful life was estimated to be 5 years). Land - was by undervalued $53,000. Equipment-was overvalued by $17,000 (remaining useful life was estimated to be 10 years). The new Goodwill from the acquisition was impaired by $16,800 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 as of the acquisition date. Determine the total "differential" and then break this amount out into the excess cost detail and (new) goodwill components. PLEASE BE SURE TO CLEARLY LABEL YOUR DETAIL. (4 POINTS) Fair Value of Consideration given from Pep Company to See's Shareholders: $ $ PLUS: Fair Value of Any Noncontrolling Interest EQUALS: Total Fair Value MINUS: Book Value of See Company's Net Identifiable Assets $ EQUALS: Differential $ MINUS: Identifiable Excess $ EQUALS: New Goodwill $ b. Recreate the 4 JOURNAL ENTRIES recorded by Pep with regard to its investment in See Company at January 1, 2019 and during 2019. PLEASE BE SURE TO SHOW YOUR WORK FOR YOUR JOURNAL ENTRY AMOUNTS. (7 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 Taccounts provided below. (2 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, 2019. IN ORDER TO RECEIVE FULL CREDIT FOR YOUR ANSWERS PLEASE BE SURE TO SHOW YOUR WORK RELATED TO THE DOLLAR AMOUNTS FOR NCINI, NCINA, INCOME FROM SEE AND INVESTMENT IN SEE. (15 POINTS) BASIC CONSOLIDATION ENTRY (6 POINTS): AMORTIZATION OF EXCESS VALUE RECLASSIFICATION ENTRY (4 POINTS): (REMAINING) EXCESS VALUE RECLASSIFICATION ENTRY (5 POINTS): e. Prepare the consolidation worksheet for the period ended December 31, 2019. You may use the template provided below OR the template on the next page. (12 POINTS) PEP CORPORATION Consolidation Worksheet For the Period Ending December 31, 2019 PEP'S G/L SEE'S G/L CONSOLIDATION ENTRIES Debit Accounts Consolidated Totals Credit Income Statement Sales Cost of Goods Sold Less Depreciation Expense, Building Depreciation Expense, Equipment Selling & Administrative Expense Goodwill impairment Loss Income from See Corp. Consolidated Net Income NCI In Net Income Controlling Interest in Net Income $ $ $ $ $ 727.500 $ (382,000) $ (62,500) IS (96,200) S (273,000) $ 573,000 (110,100) (18,600) (23,100) (128,300 $ $ 189,840 104,040 $ 292,900 $ 104,040 $ 292,900 Statement of Retained Earnings Retained Eamings (01/01/2019) Net Income (above) Dividends Declared Retained earnings, 12/31/19 $ $ $ $ 809,000 $ 104.040 $ (60.000 $ 853.040 $ 219,000 292,900 (50,000) 451.900 Balance Sheet Cash Accounts Receivable Inventory Investment in See Corp. $ $ S $ 749,500 294,000 473,000 725,340 $ $ $ 230,500 204,000 195,000 $ $ in Buildings Land Equipment Accumulated Depreciation, Bldg Accumulated Depreciation, Equip Goodwill (NEW) Total Assets 625.000 $ 790,000 $ 481,000 $ (250,000) $ (288,500) $ 350,000 225,000 233,000 (130,200) (138,600) S $ $ 3,599,240 S 1,178,700 Accounts Payable Bonds Payable Common Stock ($1 par) Additional Paid In Capital Retained earings, 12/31/19 (above) NCI In Net Assets S $ $ S S 118,000 500,000 600,000 1,528,200 853.040 $ $ $ $ $ 165,800 120,000 274,000 157,000 461,900 Total Liabilities & Stockholders' Equity $ 3.599,240 $ 1.178.700 NET ASSETS (CONTROLLING INTEREST ASSETS - LIABILITIES - NCINA ASSETS - LIABILITIES TOTAL STOCKHOLDERS' EQUITY TOTAL STOCKHOLDERS' EQUITY (CONTROLLING INTEREST Pep Corporation acquired 70 percent of See Company stock on January 1, 2019 for $570,500 cash. The fair market value of the 30 percent noncontrolling interest on this date was $244,500. SEE COMPANY Debit Credit 230,500 204,000 195,000 Following are trial balances of Pep Corporation and See Company as of December 31, 2019: PEP CORPORATION Debit Credit Cash $ 749,500 Accounts Receivable $ 294,000 Inventory $ 473,000 Investment in See Corp. $ 725,340 Buildings $ 625,000 Land $ 790,000 Equipment $ 481,000 Cost of Goods Sold $ 382,000 Depreciation Expense, Building $ 62,500 Depreciation Expense, Equipment $ 96,200 Selling & Administrative Expense $ 273,000 Dividends Declared $ 60,000 Accumulated Depreciation, Bldg $ 250,000 Accumulated Depreciation, Equip $ 288,600 Accounts Payable $ 118,000 Bonds Payable $ 500,000 Common Stock ($1 par) $ 600,000 Additional Paid In Capital $ 1,528,200 Retained Earnings (01/01/2019) $ 809,000 Sales $ 727,900 Income from See Corp. $ 189,840 $ 5,011,540 $ 5,011,540 $ $ $ $ $ $ $ $ $ $ $ $ 360,000 225,000 233,000 110,100 18,600 23,100 128,300 50,000 $ $ $ $ $ $ $ $ $ 1,777,600 $ 130,200 138,600 165,800 120,000 274,000 157,000 219,000 573,000 $ 1,777,600 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 $3,000 (all of this inventory was sold during 2019). Building - was undervalued by $48,000 (remaining useful life was estimated to be 5 years). Land - was by undervalued $53,000. Equipment-was overvalued by $17,000 (remaining useful life was estimated to be 10 years). The new Goodwill from the acquisition was impaired by $16,800 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 as of the acquisition date. Determine the total "differential" and then break this amount out into the excess cost detail and (new) goodwill components. PLEASE BE SURE TO CLEARLY LABEL YOUR DETAIL. (4 POINTS) Fair Value of Consideration given from Pep Company to See's Shareholders: $ $ PLUS: Fair Value of Any Noncontrolling Interest EQUALS: Total Fair Value MINUS: Book Value of See Company's Net Identifiable Assets $ EQUALS: Differential $ MINUS: Identifiable Excess $ EQUALS: New Goodwill $ b. Recreate the 4 JOURNAL ENTRIES recorded by Pep with regard to its investment in See Company at January 1, 2019 and during 2019. PLEASE BE SURE TO SHOW YOUR WORK FOR YOUR JOURNAL ENTRY AMOUNTS. (7 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 Taccounts provided below. (2 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, 2019. IN ORDER TO RECEIVE FULL CREDIT FOR YOUR ANSWERS PLEASE BE SURE TO SHOW YOUR WORK RELATED TO THE DOLLAR AMOUNTS FOR NCINI, NCINA, INCOME FROM SEE AND INVESTMENT IN SEE. (15 POINTS) BASIC CONSOLIDATION ENTRY (6 POINTS): AMORTIZATION OF EXCESS VALUE RECLASSIFICATION ENTRY (4 POINTS): (REMAINING) EXCESS VALUE RECLASSIFICATION ENTRY (5 POINTS): e. Prepare the consolidation worksheet for the period ended December 31, 2019. You may use the template provided below OR the template on the next page. (12 POINTS) PEP CORPORATION Consolidation Worksheet For the Period Ending December 31, 2019 PEP'S G/L SEE'S G/L CONSOLIDATION ENTRIES Debit Accounts Consolidated Totals Credit Income Statement Sales Cost of Goods Sold Less Depreciation Expense, Building Depreciation Expense, Equipment Selling & Administrative Expense Goodwill impairment Loss Income from See Corp. Consolidated Net Income NCI In Net Income Controlling Interest in Net Income $ $ $ $ $ 727.500 $ (382,000) $ (62,500) IS (96,200) S (273,000) $ 573,000 (110,100) (18,600) (23,100) (128,300 $ $ 189,840 104,040 $ 292,900 $ 104,040 $ 292,900 Statement of Retained Earnings Retained Eamings (01/01/2019) Net Income (above) Dividends Declared Retained earnings, 12/31/19 $ $ $ $ 809,000 $ 104.040 $ (60.000 $ 853.040 $ 219,000 292,900 (50,000) 451.900 Balance Sheet Cash Accounts Receivable Inventory Investment in See Corp. $ $ S $ 749,500 294,000 473,000 725,340 $ $ $ 230,500 204,000 195,000 $ $ in Buildings Land Equipment Accumulated Depreciation, Bldg Accumulated Depreciation, Equip Goodwill (NEW) Total Assets 625.000 $ 790,000 $ 481,000 $ (250,000) $ (288,500) $ 350,000 225,000 233,000 (130,200) (138,600) S $ $ 3,599,240 S 1,178,700 Accounts Payable Bonds Payable Common Stock ($1 par) Additional Paid In Capital Retained earings, 12/31/19 (above) NCI In Net Assets S $ $ S S 118,000 500,000 600,000 1,528,200 853.040 $ $ $ $ $ 165,800 120,000 274,000 157,000 461,900 Total Liabilities & Stockholders' Equity $ 3.599,240 $ 1.178.700 NET ASSETS (CONTROLLING INTEREST ASSETS - LIABILITIES - NCINA ASSETS - LIABILITIES TOTAL STOCKHOLDERS' EQUITY TOTAL STOCKHOLDERS' EQUITY (CONTROLLING INTEREST