PLEASE USE FORMULAS!!!!! I WANT TO UNDERSTAND
Project Scenario Pecos Company acquired 100 percent of Suaro's outstanding stock for $1,450,000 cash on January 1, 2020, when Suaro had the following balance sheet: Assets Liabilities and Equity $(422,000) Cash Receivables Inventory Land Equipment (net) Software Total assets $ 37,000 Liabilities 82,000 149,000 Common stock 90,000 Retained earnings 225,000 315,000 $898,000 Total liabilities and equity (350,000) (126,000) $(898,000) At the acquisition date, the fair values of each identifiable asset and liability that differed from book value were as follows: Land Brand name Software In-process R&D $ 80,000 60,000 (indefinite life-unrecognized on Suaro's books) 415,000 (2-year estimated remaining useful life) 300,000 Additional Information Although at acquisition date Pecos expected future benefits from Suaro's in-process research and development (R&D), by the end of 2020 it became clear that the research project was a failure with no future economic benefits. During 2020, Suaro earns $75,000 and pays no dividends. Selected amounts from Pecos's and Suaro's separate financial statements at December 31, 2021, are presented in the consolidated information worksheet. All consolidated worksheets are to be prepared as of December 31, 2021, two years subsequent to acquisition. Pecos's January 1, 2021, Retained Earnings balance-before any effect from Suaro's 2020 income-is $(930,000) (credit balance). Pecos has 500,000 common shares outstanding for EPS calculations and reported $2,943,100 for consolidated assets at the beginning of the period. The following is the consolidated information worksheet. Page 155 Page 156 Complete the four worksheets as follows: 1. Input the consolidated information worksheet provided and complete the fair-value allocation schedule by computing the excess amortizations for 2020 and 2021. 2. Using separate worksheets, prepare Pecos's trial balances for each of the indicated accounting methods (equity, initial value, and partial equity). Use only formulas for the Investment in Suaro, the Income of Suaro, and Retained Earnings accounts. 3. Using references to other cells only (either from the consolidated information worksheet or from the separate method sheets), prepare for each of the three consolidation worksheets: Adjustments and eliminations. . Consolidated balances. B D 1 December 31, 2021, trial balances 2 Pecos $(1,052,000) 821,000 Suaro $(427,000) 262.000 3 4 Revenues 5 Operating expenses 6 Goodwill impairment loss 7 Income of Suaro 8 Net income ? ? ? $(165,000) 9 ? ? (201,000) (165,000) 35,000 $(331,000 200,000 ? 10 Retained earnings-Pecos 1/1/21 11 Retained earnings-Suaro 1/1/21 12 Net income (above) 13 Dividends declared 14 Retained earnings 12/31/21 15 16 Cash 17 Receivables 18 Inventory 19 Investment in Suaro 20 195,000 247,000 415,000 ? 95,000 143,000 197,000 341,000 240,100 85,000 100,000 312,000 145,000 ? $ 932.000 (1,537,100) (500,000) 21 22 23 Land 24 Equipment (net) 25 Software 26 Other intangibles 27 Goodwill 28 Total assets 29 30 Liabilities 31 Common stock 32 Retained earnings (above) 33 Total liabilities and equity 34 35 Fair-value allocation schedule 36 Price paid 37 Book value 38 Excess initial value 39 to land 40 to brand name 41 to software 42 to IPR&D (251,000) (350,000) (331,000) $(932,000) ? ? 1,450,000 476,000 974,000 (10,000) 60,000 100,000 300,000 Amortizations 2020 2021 ? ? ? ? ? ? 524,000 ? ? 43 to goodwill 44 45 Suaro's RE changes 46 2020 47 2021 Dividends Income 75,000 165,000 0 35,000
