Please see the directions on page 3 for preparing the solution to the problem. Pitt Corporation manufactures household appliances. On January 1, 2017, Pitt acquires Streep Corporation, a furniture manufacturer. Pitt pays $840,000 for 70% of Streep's common stock. Streep has the following balance sheet on January 1, 2017: Streep Corporation Balance Sheet January 1, 2017 Assets Liabilities and Equity Accounts receivable........................ Inventory............... Land.. ................ Buildings.......... Accumulated depreciation............ Equipment. Accumulated depreciation............. Total assets...................................... $ 64,000 80,000 120,000 500,000 (100,000) 200,000 (60,000) $804,000 Current liabilities............................ Bonds payable................................. Common stock, $ 1 par................ Paid-in capital in excess of par..... Retained earnings................ ..... 180,000 200,000 20,000 180,000 224,000 Total liabilities and equity......... $804,000 Appraisal values for identifiable assets and liabilities are as follows: .............................. Accounts receivable................. Inventory (sold during 2017)................... Land. Buildings (20-year life)..................... Equipment (5-year life........................... Current liabilities.................... Bonds payable (5-year life)................. $ 64,000 76,000 300,000 600,000 200,000 180,000 192,000 Any remaining excess is attributed to goodwill. On January 1, 2018, Streep sold equipment with a book value of $60,000 to Pitt for $108,000. This equipment has a 6-year life and is depreciated using the straight-line method. Directions: The solution to the above problem should be typed and include: (1) a value analysis; (2) a D&D schedule; (3) an amortization schedule; (4) a schedule to prepare the intercompany sales- related entries on the worksheet; (4) worksheet entries in journal entry form; (5) the completed worksheet through the consolidated balance sheet column; (6) income distribution schedules; and (7) the consolidated financial statements (income statement, statement of retained earnings and balance sheet). In preparing the financial statements, use the statements in Exhibit 3-2 (pages 137-138) as a guide. Note that the bonds issued by Streep are not acquired by Pitt, so that there are no intercompany bond worksheet entries (B1 and B2) to be prepared. Therefore, the project can be prepared based on the material covered in Chapters 2-4. However, to assist you in preparing the amortization schedule and the "A" worksheet entry, please review the example of Paulos and Carlos on pages 132-138 in your text. Pitt uses the simple equity method to account for its investment in Streep. Pitt and Streep have the following trial balances on December 31, 2019. Streep 120,000 110,000 172,000 120,000 Cash...... Accounts Receivable....... ......... Inventory........................................................................ Land.. Investment in Streep............................. Buildings.......................... Accumulated Depreciation.... Equipment.............. Accumulated Depreciation... Accounts Payable...... Bonds Payable................. Common Stock... Paid-In Capital in Excess of Par................ Retained Earnings, January 1, 2019........... Pitt 314,000 180,000 240,000 200,000 973,000 1,600,000 (440,000) 300,000 (180,000) (120,000) 600,000 (160,000) 200,000 (144,000) (204,000) (200,000) (20,000) (180,000) (364,000) (700,000) 420,000 30,000 28,000 136,000 16,000 ................ (200,000) (1,800,000) (728,000) (1,600,000) 900,000 60,000 30,000 280,000 Sales................ Cost of Goods Sold.......... Depreciation Expense-Buildings Depreciation Expense-Equipment................................... Other Expenses.............. Interest Expenses............................... Subsidiary Income................... Dividends Declared............................... Totals.. ................... (49,000) 40,000 20,000 On January 1, 2019, Streep held merchandise sold to it by Pitt for $24,000. This inventory had an applicable gross profit of 35%. During 2019, Pitt sold merchandise to Streep for $120,000. On December 31, 2019, Streep held $20,000 of this merchandise in its inventory. This ending inventory held an applicable gross profit rate of 40%. Streep owed Pitt $ 16,000 on December 31 as a result of this intercompany sale. Pitt held $32,000 worth of merchandise in its January 1, 2019, inventory from sales from Streep. This beginning inventory had an applicable gross profit of 30%. During 2019, Streep sold merchandise to Pitt for $60,000. Pitt held $ 40,000 of this inventory at the end of the year. This ending inventory had an applicable gross profit of 35%. Pitt owed Streep $12,000 on December 31 as a result of this intercompany sale. On January 1, 2017, Pitt sold equipment to Streep at a gain of $80,000. Depreciation on this equipment is computed over an 8-year life, using the straight-line method. Please see the directions on page 3 for preparing the solution to the problem. Pitt Corporation manufactures household appliances. On January 1, 2017, Pitt acquires Streep Corporation, a furniture manufacturer. Pitt pays $840,000 for 70% of Streep's common stock. Streep has the following balance sheet on January 1, 2017: Streep Corporation Balance Sheet January 1, 2017 Assets Liabilities and Equity Accounts receivable........................ Inventory............... Land.. ................ Buildings.......... Accumulated depreciation............ Equipment. Accumulated depreciation............. Total assets...................................... $ 64,000 80,000 120,000 500,000 (100,000) 200,000 (60,000) $804,000 Current liabilities............................ Bonds payable................................. Common stock, $ 1 par................ Paid-in capital in excess of par..... Retained earnings................ ..... 180,000 200,000 20,000 180,000 224,000 Total liabilities and equity......... $804,000 Appraisal values for identifiable assets and liabilities are as follows: .............................. Accounts receivable................. Inventory (sold during 2017)................... Land. Buildings (20-year life)..................... Equipment (5-year life........................... Current liabilities.................... Bonds payable (5-year life)................. $ 64,000 76,000 300,000 600,000 200,000 180,000 192,000 Any remaining excess is attributed to goodwill. On January 1, 2018, Streep sold equipment with a book value of $60,000 to Pitt for $108,000. This equipment has a 6-year life and is depreciated using the straight-line method. Directions: The solution to the above problem should be typed and include: (1) a value analysis; (2) a D&D schedule; (3) an amortization schedule; (4) a schedule to prepare the intercompany sales- related entries on the worksheet; (4) worksheet entries in journal entry form; (5) the completed worksheet through the consolidated balance sheet column; (6) income distribution schedules; and (7) the consolidated financial statements (income statement, statement of retained earnings and balance sheet). In preparing the financial statements, use the statements in Exhibit 3-2 (pages 137-138) as a guide. Note that the bonds issued by Streep are not acquired by Pitt, so that there are no intercompany bond worksheet entries (B1 and B2) to be prepared. Therefore, the project can be prepared based on the material covered in Chapters 2-4. However, to assist you in preparing the amortization schedule and the "A" worksheet entry, please review the example of Paulos and Carlos on pages 132-138 in your text. Pitt uses the simple equity method to account for its investment in Streep. Pitt and Streep have the following trial balances on December 31, 2019. Streep 120,000 110,000 172,000 120,000 Cash...... Accounts Receivable....... ......... Inventory........................................................................ Land.. Investment in Streep............................. Buildings.......................... Accumulated Depreciation.... Equipment.............. Accumulated Depreciation... Accounts Payable...... Bonds Payable................. Common Stock... Paid-In Capital in Excess of Par................ Retained Earnings, January 1, 2019........... Pitt 314,000 180,000 240,000 200,000 973,000 1,600,000 (440,000) 300,000 (180,000) (120,000) 600,000 (160,000) 200,000 (144,000) (204,000) (200,000) (20,000) (180,000) (364,000) (700,000) 420,000 30,000 28,000 136,000 16,000 ................ (200,000) (1,800,000) (728,000) (1,600,000) 900,000 60,000 30,000 280,000 Sales................ Cost of Goods Sold.......... Depreciation Expense-Buildings Depreciation Expense-Equipment................................... Other Expenses.............. Interest Expenses............................... Subsidiary Income................... Dividends Declared............................... Totals.. ................... (49,000) 40,000 20,000 On January 1, 2019, Streep held merchandise sold to it by Pitt for $24,000. This inventory had an applicable gross profit of 35%. During 2019, Pitt sold merchandise to Streep for $120,000. On December 31, 2019, Streep held $20,000 of this merchandise in its inventory. This ending inventory held an applicable gross profit rate of 40%. Streep owed Pitt $ 16,000 on December 31 as a result of this intercompany sale. Pitt held $32,000 worth of merchandise in its January 1, 2019, inventory from sales from Streep. This beginning inventory had an applicable gross profit of 30%. During 2019, Streep sold merchandise to Pitt for $60,000. Pitt held $ 40,000 of this inventory at the end of the year. This ending inventory had an applicable gross profit of 35%. Pitt owed Streep $12,000 on December 31 as a result of this intercompany sale. On January 1, 2017, Pitt sold equipment to Streep at a gain of $80,000. Depreciation on this equipment is computed over an 8-year life, using the straight-line method