Prepare a word-processed report that describes and discusses the following worksheet results A) the effects of alternative investment accounting methods on the parent?s trial balances and the final consolidation figures. B) The relation between the consolidated retained earnings and the parents retained earnings under each of the three (equity, initial value, partial equity) investment accounting methods. C) The effect on EPS, return on assets, return on equity, and debt-to-equity ratios of the recognition that all acquisition-related goodwill is considered impaired in 2010.

Facts: Peco's acquires 100% of Suaro on 1/1/09 During 2009 Suaro Earns Income Dividend Pd by Suaro in 2009 Pecos expected Economic Benefit of IPR&D $1,450,000 $75,000 0 0 Suaro Jan 1, 2009 Balance Sheet Assets Cash Receivables Inventory Land Equipment Software Total Assets Liabilities & Equity Liabilities Common Stock Retained Earnings Total Liabilities & Equity 2010 0 0 Fair Value $37,000 $82,000 $149,000 $90,000 $225,000 $315,000 $898,000 ($422,000) ($350,000) ($126,000) ($898,000) 80000 Chapter 3 - Computer Project PECOS COMPANY AND SUARO COMPANY Consolidated Information Worksheet December 31, 2010 Pecos Revenues -1,052,000 Operating expenses 821,000 Amortization of intangibles Goodwill impairment loss Income of Suaro Net income -231,000 Retained earningsPecos, 1/1 Retained earningsSuaro, 1/1 Net income (above) Dividends paid Retained earnings, 12/31 Cash Receivables Inventory Investment in Suaro Land Equipment (net) Software Other intangibles Goodwill Total assets Liabilities Common stock Retained earnings (above) Total liabilities and equity Suaro -427,000 262,000 0 0 0 -165,000 0 -231,000 200,000 -31,000 -201,000 -165,000 35,000 -331,000 195,000 247,000 415,000 341,000 240,100 0 145,000 0 1,583,100 95,000 143,000 197,000 0 85,000 100,000 312,000 0 0 932,000 -1,537,100 -500,000 -31,000 -2,068,100 -251,000 -350,000 -331,000 -932,000 Fair Value Allocation Schedule Acquisition-date fair value 1,450,000 Book value 476,000 Excess fair value over book value 974,000 Amortizations and Write-off Account Land Brand Name Software IPR&D Goodwill Total Allocation Annual Excess Amortization useful life -10,000 indefinite 60,000 indefinite 100,000 300,000 524,000 2 0 2009 2010 50,000 50,000 300,000 50,000 50,000 350,000 50,000 Suaro's Retained Earnings Changes 2009 2010 Income 75,000 165,000 Dividends 0 35,000 PECOS COMPANY AND SUARO COMPANY Consolidated Worksheet For the Year Ended December 31, 2010 EQUITY METHOD Revenues Operating expenses Amortization of intangibles Goodwill impairment loss Income of Suaro Net income Retained earningsPecos, 1/1 Retained earningsSuaro, 1/1 Net income (above) Dividends paid Retained earnings, 12/31 Pecos -1,052,000 821,000 -115,000 -346,000 Suaro -427,000 262,000 0 0 0 -165,000 Consolidation Entries Debit Credit 50,000 (I) -655,000 0 -346,000 200,000 -801,000 0 -201,000 (S) -165,000 35,000 -331,000 Cash Receivables Inventory Investment in Suaro 195,000 247,000 415,000 1,255,000 95,000 143,000 197,000 0 (D) Land Equipment (net) Software Other intangibles Brand name Goodwill Total assets 341,000 240,100 0 145,000 0 0 2,838,100 85,000 100,000 312,000 (A) 0 0 (A) 0 (A) 932,000 -1,537,100 -500,000 -801,000 -2,838,100 -251,000 -350,000 (S) -331,000 -932,000 Liabilities Common stock Retained earnings (above) Total liabilities and equity 115,000 201,000 (D) 35,000 50,000 35,000 (S) (A) (I) (A) 551,000 624,000 115,000 10,000 (E) 50,000 60,000 524,000 350,000 1,385,000 1,385,000 Consolidated Totals -1,479,000 1,133,000 0 0 0 -346,000 -655,000 0 -346,000 200,000 -801,000 290,000 390,000 612,000 0 416,000 340,100 312,000 145,000 60,000 524,000 3,089,100 -1,788,100 -500,000 -801,000 -3,089,100 PECOS COMPANY AND SUARO COMPANY Consolidated Worksheet For the Year Ended December 31, 2010 PARTIAL EQUITY METHOD -165,000 -396,000 Suaro -427,000 262,000 (E) 0 0 0 (I) -165,000 -1,005,000 0 -396,000 200,000 -1,201,000 (*C) -201,000 (S) -165,000 35,000 -331,000 Cash Receivables Inventory Investment in Suaro 195,000 247,000 415,000 1,655,000 95,000 143,000 197,000 0 (D) Land Equipment (net) Software Other intangibles Brand name Goodwill Total assets 341,000 240,100 0 145,000 0 0 3,238,100 85,000 100,000 312,000 (A) 0 0 (A) 0 (A) 932,000 -1,537,100 -500,000 -1,201,000 -3,238,100 -251,000 -350,000 (S) -331,000 -932,000 Revenues Operating expenses Amortization of intangibles Goodwill impairment loss Income of Suaro Net income Retained earningsPecos, 1/1 Retained earningsSuaro, 1/1 Net income (above) Dividends paid Retained earnings, 12/31 Liabilities Common stock Retained earnings (above) Total liabilities and equity Pecos -1,052,000 821,000 Consolidation Entries Debit Credit 50,000 165,000 350,000 201,000 (D) 35,000 50,000 35,000 (S) (A) (I) (*C) (A) 551,000 624,000 165,000 350,000 10,000 (E) 50,000 60,000 524,000 350,000 1,785,000 1,785,000 Consolidated Totals -1,479,000 1,133,000 0 0 0 -346,000 -655,000 0 -346,000 200,000 -801,000 290,000 390,000 612,000 0 416,000 340,100 312,000 145,000 60,000 524,000 3,089,100 -1,788,100 -500,000 -801,000 -3,089,100 PECOS COMPANY AND SUARO COMPANY Consolidated Worksheet For the Year Ended December 31, 2010 INITIAL VALUE METHOD Revenues Operating expenses Amortization of intangibles Goodwill impairment loss Income of Suaro Net income Retained earningsPecos, 1/1 Retained earningsSuaro, 1/1 Net income (above) Dividends paid Retained earnings, 12/31 Pecos -1,052,000 821,000 -35,000 -266,000 Suaro -427,000 262,000 (E) 0 0 0 (I) -165,000 -930,000 0 -266,000 200,000 -996,000 (*C) -201,000 (S) -165,000 35,000 -331,000 Cash Receivables Inventory Investment in Suaro 195,000 247,000 415,000 1,450,000 341,000 240,100 0 145,000 0 0 3,033,100 85,000 100,000 312,000 (A) 0 0 (A) 0 (A) 932,000 -1,537,100 -500,000 -996,000 -3,033,100 -251,000 -350,000 (S) -331,000 -932,000 50,000 35,000 275,000 201,000 (I) 95,000 143,000 197,000 0 Land Equipment (net) Software Other intangibles Brand name Goodwill Total assets Consolidation Entries Debit Credit Liabilities Common stock Retained earnings (above) Total liabilities and equity 35,000 Consolidated Totals -1,479,000 1,133,000 0 0 0 -346,000 -655,000 0 -346,000 200,000 -801,000 290,000 390,000 612,000 (S) (A) (*C) (A) 50,000 551,000 624,000 275,000 10,000 (E) 50,000 60,000 524,000 350,000 1,545,000 1,545,000 416,000 340,100 312,000 145,000 60,000 524,000 3,089,100 -1,788,100 -500,000 -801,000 -3,089,100 PECOS COMPANY AND SUARO COMPANY Goodwill Impairment Loss Effects Without Impairment Common shares outstanding Consolidated net income/(loss) Consolidated assets, 1/1/10 Consolidated assets, 12/31/10 Consolidated equity, 1/1/10 Consolidated equity, 12/31/10 Consolidated liabilities Earnings-per-share Return on assets Return on equity Debt-to-equity With Impairment 500,000.00 346,000.00 2,943,100.00 3,089,100.00 1,155,000.00 1,301,000.00 (1,788,100.00) 500,000.00 (178,000.00) 2,943,100.00 2,565,100.00 1,155,000.00 777,000.00 (1,788,100.00) 0.69 11.47% 28.18% 1.37 (0.36) -6.46% -18.43% 2.30 PECOS COMPANY AND SUARO COMPANY Consolidated Worksheet For the Year Ended December 31, 2010 EQUITY METHOD - GOODWILL IMPAIRMENT LOSS Pecos Revenues Operating expenses Amortization of intangibles Goodwill impairment loss Income of Suaro Net income Retained earningsPecos, 1/1 Retained earningsSuaro, 1/1 Net income (above) Dividends paid Retained earnings, 12/31 Cash Receivables Inventory Investment in Suaro -1,052,000 821,000 Suaro 524,000 -115,000 178,000 -427,000 262,000 0 (E) 0 0 (I) -165,000 -655,000 0 178,000 200,000 -277,000 0 -201,000 (S) -165,000 35,000 -331,000 195,000 247,000 415,000 731,000 95,000 143,000 197,000 0 (D) 341,000 240,100 0 145,000 0 2,314,100 85,000 100,000 312,000 (A) 0 (A) 0 932,000 -1,537,100 -500,000 -277,000 -2,314,100 -251,000 -350,000 (S) -331,000 -932,000 Consolidation Entries Debit Credit Consolidated Totals -1,479,000 1,083,000 50,000 524,000 0 178,000 50000 115,000 201,000 (D) 35,000 35,000 (S) (A) (I) 551,000 100,000 115,000 (A) 10,000 50000 (E) 50,000 -655,000 0 178,000 200,000 -277,000 290,000 390,000 612,000 0 Consolidated Worksheet (continued) Land Equipment (net) Software Other intangibles Brand name Goodwill Total assets Liabilities Common stock Retained earnings (above) Total liabilities and equity Shaded items were provided on the Consolidated Information Worksheet 60000 350000 861,000 861,000 416,000 340,100 312,000 145,000 60,000 0 1,273,100 -1,788,100 -500,000 -277,000 -2,565,100 Group Project Grading Rubric ACC 405 Advanced Accounting Computer Project - Chapter 3, Pages 138-141 Points Possible Points Assigned Comments Group Discussions about Project The members of the group identified, assigned, discussed, and completed the group project. Correct Answers on Each of the Required Worksheet in the Student Excel Template Fair Value Allocation Schedule-2009 Fair Value Allocation Schedule-2010 Equity Method Initial Value Method Partial Equity Method Goodwill Impairment Equity Method with Goodwill Impairment Grand Total Individual Student Members of each Group may receive less than the total group Points awarded if their contributions to the group are not deemed adaquate by the Instructor 10 5 5 20 20 20 10 20 110 0 Facts: Peco's acquires 100% of Suaro on 1/1/09 During 2009 Suaro Earns Income Dividend Pd by Suaro in 2009 Pecos expected Economic Benefit of IPR&D $1,450,000 $75,000 0 0 Suaro Jan 1, 2009 Balance Sheet Assets Cash Receivables Inventory Land Equipment Software Total Assets Liabilities & Equity Liabilities Common Stock Retained Earnings Total Liabilities & Equity 2010 0 0 Fair Value $37,000 $82,000 $149,000 $90,000 $225,000 $315,000 $898,000 ($422,000) ($350,000) ($126,000) ($898,000) 80000 Chapter 3 - Computer Project PECOS COMPANY AND SUARO COMPANY Consolidated Information Worksheet December 31, 2010 Pecos Revenues -1,052,000 Operating expenses 821,000 Amortization of intangibles Goodwill impairment loss Income of Suaro Net income -231,000 Retained earningsPecos, 1/1 Retained earningsSuaro, 1/1 Net income (above) Dividends paid Retained earnings, 12/31 Cash Receivables Inventory Investment in Suaro Land Equipment (net) Software Other intangibles Goodwill Total assets Liabilities Common stock Retained earnings (above) Total liabilities and equity Suaro -427,000 262,000 0 0 0 -165,000 0 -231,000 200,000 -31,000 -201,000 -165,000 35,000 -331,000 195,000 247,000 415,000 341,000 240,100 0 145,000 0 1,583,100 95,000 143,000 197,000 0 85,000 100,000 312,000 0 0 932,000 -1,537,100 -500,000 -31,000 -2,068,100 -251,000 -350,000 -331,000 -932,000 Fair Value Allocation Schedule Acquisition-date fair value 1,450,000 Book value 476,000 Excess fair value over book value 974,000 Amortizations and Write-off Account Land Brand Name Software IPR&D Goodwill Total Allocation Annual Excess Amortization useful life -10,000 indefinite 60,000 indefinite 100,000 300,000 524,000 2 0 2009 2010 50,000 50,000 300,000 50,000 50,000 350,000 50,000 Suaro's Retained Earnings Changes 2009 2010 Income 75,000 165,000 Dividends 0 35,000 PECOS COMPANY AND SUARO COMPANY Consolidated Worksheet For the Year Ended December 31, 2010 EQUITY METHOD Revenues Operating expenses Amortization of intangibles Goodwill impairment loss Income of Suaro Net income Retained earningsPecos, 1/1 Retained earningsSuaro, 1/1 Net income (above) Dividends paid Retained earnings, 12/31 Pecos -1,052,000 821,000 -115,000 -346,000 Suaro -427,000 262,000 0 0 0 -165,000 Consolidation Entries Debit Credit 50,000 (I) -655,000 0 -346,000 200,000 -801,000 0 -201,000 (S) -165,000 35,000 -331,000 Cash Receivables Inventory Investment in Suaro 195,000 247,000 415,000 1,255,000 95,000 143,000 197,000 0 (D) Land Equipment (net) Software Other intangibles Brand name Goodwill Total assets 341,000 240,100 0 145,000 0 0 2,838,100 85,000 100,000 312,000 (A) 0 0 (A) 0 (A) 932,000 -1,537,100 -500,000 -801,000 -2,838,100 -251,000 -350,000 (S) -331,000 -932,000 Liabilities Common stock Retained earnings (above) Total liabilities and equity 115,000 201,000 (D) 35,000 50,000 35,000 (S) (A) (I) (A) 551,000 624,000 115,000 10,000 (E) 50,000 60,000 524,000 350,000 1,385,000 1,385,000 Consolidated Totals -1,479,000 1,133,000 0 0 0 -346,000 -655,000 0 -346,000 200,000 -801,000 290,000 390,000 612,000 0 416,000 340,100 312,000 145,000 60,000 524,000 3,089,100 -1,788,100 -500,000 -801,000 -3,089,100 PECOS COMPANY AND SUARO COMPANY Consolidated Worksheet For the Year Ended December 31, 2010 PARTIAL EQUITY METHOD -165,000 -396,000 Suaro -427,000 262,000 (E) 0 0 0 (I) -165,000 -1,005,000 0 -396,000 200,000 -1,201,000 (*C) -201,000 (S) -165,000 35,000 -331,000 Cash Receivables Inventory Investment in Suaro 195,000 247,000 415,000 1,655,000 95,000 143,000 197,000 0 (D) Land Equipment (net) Software Other intangibles Brand name Goodwill Total assets 341,000 240,100 0 145,000 0 0 3,238,100 85,000 100,000 312,000 (A) 0 0 (A) 0 (A) 932,000 -1,537,100 -500,000 -1,201,000 -3,238,100 -251,000 -350,000 (S) -331,000 -932,000 Revenues Operating expenses Amortization of intangibles Goodwill impairment loss Income of Suaro Net income Retained earningsPecos, 1/1 Retained earningsSuaro, 1/1 Net income (above) Dividends paid Retained earnings, 12/31 Liabilities Common stock Retained earnings (above) Total liabilities and equity Pecos -1,052,000 821,000 Consolidation Entries Debit Credit 50,000 165,000 350,000 201,000 (D) 35,000 50,000 35,000 (S) (A) (I) (*C) (A) 551,000 624,000 165,000 350,000 10,000 (E) 50,000 60,000 524,000 350,000 1,785,000 1,785,000 Consolidated Totals -1,479,000 1,133,000 0 0 0 -346,000 -655,000 0 -346,000 200,000 -801,000 290,000 390,000 612,000 0 416,000 340,100 312,000 145,000 60,000 524,000 3,089,100 -1,788,100 -500,000 -801,000 -3,089,100 PECOS COMPANY AND SUARO COMPANY Consolidated Worksheet For the Year Ended December 31, 2010 INITIAL VALUE METHOD Revenues Operating expenses Amortization of intangibles Goodwill impairment loss Income of Suaro Net income Retained earningsPecos, 1/1 Retained earningsSuaro, 1/1 Net income (above) Dividends paid Retained earnings, 12/31 Pecos -1,052,000 821,000 -35,000 -266,000 Suaro -427,000 262,000 (E) 0 0 0 (I) -165,000 -930,000 0 -266,000 200,000 -996,000 (*C) -201,000 (S) -165,000 35,000 -331,000 Cash Receivables Inventory Investment in Suaro 195,000 247,000 415,000 1,450,000 341,000 240,100 0 145,000 0 0 3,033,100 85,000 100,000 312,000 (A) 0 0 (A) 0 (A) 932,000 -1,537,100 -500,000 -996,000 -3,033,100 -251,000 -350,000 (S) -331,000 -932,000 50,000 35,000 275,000 201,000 (I) 95,000 143,000 197,000 0 Land Equipment (net) Software Other intangibles Brand name Goodwill Total assets Consolidation Entries Debit Credit Liabilities Common stock Retained earnings (above) Total liabilities and equity 35,000 Consolidated Totals -1,479,000 1,133,000 0 0 0 -346,000 -655,000 0 -346,000 200,000 -801,000 290,000 390,000 612,000 (S) (A) (*C) (A) 50,000 551,000 624,000 275,000 10,000 (E) 50,000 60,000 524,000 350,000 1,545,000 1,545,000 416,000 340,100 312,000 145,000 60,000 524,000 3,089,100 -1,788,100 -500,000 -801,000 -3,089,100 PECOS COMPANY AND SUARO COMPANY Goodwill Impairment Loss Effects Without Impairment Common shares outstanding Consolidated net income/(loss) Consolidated assets, 1/1/10 Consolidated assets, 12/31/10 Consolidated equity, 1/1/10 Consolidated equity, 12/31/10 Consolidated liabilities Earnings-per-share Return on assets Return on equity Debt-to-equity With Impairment 500,000.00 346,000.00 2,943,100.00 3,089,100.00 1,155,000.00 1,301,000.00 (1,788,100.00) 500,000.00 (178,000.00) 2,943,100.00 2,565,100.00 1,155,000.00 777,000.00 (1,788,100.00) 0.69 11.47% 28.18% 1.37 (0.36) -6.46% -18.43% 2.30 PECOS COMPANY AND SUARO COMPANY Consolidated Worksheet For the Year Ended December 31, 2010 EQUITY METHOD - GOODWILL IMPAIRMENT LOSS Pecos Revenues Operating expenses Amortization of intangibles Goodwill impairment loss Income of Suaro Net income Retained earningsPecos, 1/1 Retained earningsSuaro, 1/1 Net income (above) Dividends paid Retained earnings, 12/31 Cash Receivables Inventory Investment in Suaro -1,052,000 821,000 Suaro 524,000 -115,000 178,000 -427,000 262,000 0 (E) 0 0 (I) -165,000 -655,000 0 178,000 200,000 -277,000 0 -201,000 (S) -165,000 35,000 -331,000 195,000 247,000 415,000 731,000 95,000 143,000 197,000 0 (D) 341,000 240,100 0 145,000 0 2,314,100 85,000 100,000 312,000 (A) 0 (A) 0 932,000 -1,537,100 -500,000 -277,000 -2,314,100 -251,000 -350,000 (S) -331,000 -932,000 Consolidation Entries Debit Credit Consolidated Totals -1,479,000 1,083,000 50,000 524,000 0 178,000 50000 115,000 201,000 (D) 35,000 35,000 (S) (A) (I) 551,000 100,000 115,000 (A) 10,000 50000 (E) 50,000 -655,000 0 178,000 200,000 -277,000 290,000 390,000 612,000 0 Consolidated Worksheet (continued) Land Equipment (net) Software Other intangibles Brand name Goodwill Total assets Liabilities Common stock Retained earnings (above) Total liabilities and equity Shaded items were provided on the Consolidated Information Worksheet 60000 350000 861,000 861,000 416,000 340,100 312,000 145,000 60,000 0 1,273,100 -1,788,100 -500,000 -277,000 -2,565,100 Group Project Grading Rubric ACC 405 Advanced Accounting Computer Project - Chapter 3, Pages 138-141 Points Possible Points Assigned Comments Group Discussions about Project The members of the group identified, assigned, discussed, and completed the group project. Correct Answers on Each of the Required Worksheet in the Student Excel Template Fair Value Allocation Schedule-2009 Fair Value Allocation Schedule-2010 Equity Method Initial Value Method Partial Equity Method Goodwill Impairment Equity Method with Goodwill Impairment Grand Total Individual Student Members of each Group may receive less than the total group Points awarded if their contributions to the group are not deemed adaquate by the Instructor 10 5 5 20 20 20 10 20 110 0 Facts: Peco's acquires 100% of Suaro on 1/1/09 During 2009 Suaro Earns Income Dividend Pd by Suaro in 2009 Pecos expected Economic Benefit of IPR&D $1,450,000 $75,000 0 0 Suaro Jan 1, 2009 Balance Sheet Assets Cash Receivables Inventory Land Equipment Software Total Assets Liabilities & Equity Liabilities Common Stock Retained Earnings Total Liabilities & Equity 2010 0 0 Fair Value $37,000 $82,000 $149,000 $90,000 $225,000 $315,000 $898,000 ($422,000) ($350,000) ($126,000) ($898,000) 80000 Chapter 3 - Computer Project PECOS COMPANY AND SUARO COMPANY Consolidated Information Worksheet December 31, 2010 Pecos Revenues -1,052,000 Operating expenses 821,000 Amortization of intangibles Goodwill impairment loss Income of Suaro Net income -231,000 Retained earningsPecos, 1/1 Retained earningsSuaro, 1/1 Net income (above) Dividends paid Retained earnings, 12/31 Cash Receivables Inventory Investment in Suaro Land Equipment (net) Software Other intangibles Goodwill Total assets Liabilities Common stock Retained earnings (above) Total liabilities and equity Suaro -427,000 262,000 0 0 0 -165,000 0 -231,000 200,000 -31,000 -201,000 -165,000 35,000 -331,000 195,000 247,000 415,000 341,000 240,100 0 145,000 0 1,583,100 95,000 143,000 197,000 0 85,000 100,000 312,000 0 0 932,000 -1,537,100 -500,000 -31,000 -2,068,100 -251,000 -350,000 -331,000 -932,000 Fair Value Allocation Schedule Acquisition-date fair value 1,450,000 Book value 476,000 Excess fair value over book value 974,000 Amortizations and Write-off Account Land Brand Name Software IPR&D Goodwill Total Allocation Annual Excess Amortization useful life -10,000 indefinite 60,000 indefinite 100,000 300,000 524,000 2 0 2009 2010 50,000 50,000 300,000 50,000 50,000 350,000 50,000 Suaro's Retained Earnings Changes 2009 2010 Income 75,000 165,000 Dividends 0 35,000 PECOS COMPANY AND SUARO COMPANY Consolidated Worksheet For the Year Ended December 31, 2010 EQUITY METHOD Revenues Operating expenses Amortization of intangibles Goodwill impairment loss Income of Suaro Net income Retained earningsPecos, 1/1 Retained earningsSuaro, 1/1 Net income (above) Dividends paid Retained earnings, 12/31 Pecos -1,052,000 821,000 -115,000 -346,000 Suaro -427,000 262,000 0 0 0 -165,000 Consolidation Entries Debit Credit 50,000 (I) -655,000 0 -346,000 200,000 -801,000 0 -201,000 (S) -165,000 35,000 -331,000 Cash Receivables Inventory Investment in Suaro 195,000 247,000 415,000 1,255,000 95,000 143,000 197,000 0 (D) Land Equipment (net) Software Other intangibles Brand name Goodwill Total assets 341,000 240,100 0 145,000 0 0 2,838,100 85,000 100,000 312,000 (A) 0 0 (A) 0 (A) 932,000 -1,537,100 -500,000 -801,000 -2,838,100 -251,000 -350,000 (S) -331,000 -932,000 Liabilities Common stock Retained earnings (above) Total liabilities and equity 115,000 201,000 (D) 35,000 50,000 35,000 (S) (A) (I) (A) 551,000 624,000 115,000 10,000 (E) 50,000 60,000 524,000 350,000 1,385,000 1,385,000 Consolidated Totals -1,479,000 1,133,000 0 0 0 -346,000 -655,000 0 -346,000 200,000 -801,000 290,000 390,000 612,000 0 416,000 340,100 312,000 145,000 60,000 524,000 3,089,100 -1,788,100 -500,000 -801,000 -3,089,100 PECOS COMPANY AND SUARO COMPANY Consolidated Worksheet For the Year Ended December 31, 2010 PARTIAL EQUITY METHOD -165,000 -396,000 Suaro -427,000 262,000 (E) 0 0 0 (I) -165,000 -1,005,000 0 -396,000 200,000 -1,201,000 (*C) -201,000 (S) -165,000 35,000 -331,000 Cash Receivables Inventory Investment in Suaro 195,000 247,000 415,000 1,655,000 95,000 143,000 197,000 0 (D) Land Equipment (net) Software Other intangibles Brand name Goodwill Total assets 341,000 240,100 0 145,000 0 0 3,238,100 85,000 100,000 312,000 (A) 0 0 (A) 0 (A) 932,000 -1,537,100 -500,000 -1,201,000 -3,238,100 -251,000 -350,000 (S) -331,000 -932,000 Revenues Operating expenses Amortization of intangibles Goodwill impairment loss Income of Suaro Net income Retained earningsPecos, 1/1 Retained earningsSuaro, 1/1 Net income (above) Dividends paid Retained earnings, 12/31 Liabilities Common stock Retained earnings (above) Total liabilities and equity Pecos -1,052,000 821,000 Consolidation Entries Debit Credit 50,000 165,000 350,000 201,000 (D) 35,000 50,000 35,000 (S) (A) (I) (*C) (A) 551,000 624,000 165,000 350,000 10,000 (E) 50,000 60,000 524,000 350,000 1,785,000 1,785,000 Consolidated Totals -1,479,000 1,133,000 0 0 0 -346,000 -655,000 0 -346,000 200,000 -801,000 290,000 390,000 612,000 0 416,000 340,100 312,000 145,000 60,000 524,000 3,089,100 -1,788,100 -500,000 -801,000 -3,089,100 PECOS COMPANY AND SUARO COMPANY Consolidated Worksheet For the Year Ended December 31, 2010 INITIAL VALUE METHOD Revenues Operating expenses Amortization of intangibles Goodwill impairment loss Income of Suaro Net income Retained earningsPecos, 1/1 Retained earningsSuaro, 1/1 Net income (above) Dividends paid Retained earnings, 12/31 Pecos -1,052,000 821,000 -35,000 -266,000 Suaro -427,000 262,000 (E) 0 0 0 (I) -165,000 -930,000 0 -266,000 200,000 -996,000 (*C) -201,000 (S) -165,000 35,000 -331,000 Cash Receivables Inventory Investment in Suaro 195,000 247,000 415,000 1,450,000 341,000 240,100 0 145,000 0 0 3,033,100 85,000 100,000 312,000 (A) 0 0 (A) 0 (A) 932,000 -1,537,100 -500,000 -996,000 -3,033,100 -251,000 -350,000 (S) -331,000 -932,000 50,000 35,000 275,000 201,000 (I) 95,000 143,000 197,000 0 Land Equipment (net) Software Other intangibles Brand name Goodwill Total assets Consolidation Entries Debit Credit Liabilities Common stock Retained earnings (above) Total liabilities and equity 35,000 Consolidated Totals -1,479,000 1,133,000 0 0 0 -346,000 -655,000 0 -346,000 200,000 -801,000 290,000 390,000 612,000 (S) (A) (*C) (A) 50,000 551,000 624,000 275,000 10,000 (E) 50,000 60,000 524,000 350,000 1,545,000 1,545,000 416,000 340,100 312,000 145,000 60,000 524,000 3,089,100 -1,788,100 -500,000 -801,000 -3,089,100 PECOS COMPANY AND SUARO COMPANY Goodwill Impairment Loss Effects Without Impairment Common shares outstanding Consolidated net income/(loss) Consolidated assets, 1/1/10 Consolidated assets, 12/31/10 Consolidated equity, 1/1/10 Consolidated equity, 12/31/10 Consolidated liabilities Earnings-per-share Return on assets Return on equity Debt-to-equity With Impairment 500,000.00 346,000.00 2,943,100.00 3,089,100.00 1,155,000.00 1,301,000.00 (1,788,100.00) 500,000.00 (178,000.00) 2,943,100.00 2,565,100.00 1,155,000.00 777,000.00 (1,788,100.00) 0.69 11.47% 28.18% 1.37 (0.36) -6.46% -18.43% 2.30 PECOS COMPANY AND SUARO COMPANY Consolidated Worksheet For the Year Ended December 31, 2010 EQUITY METHOD - GOODWILL IMPAIRMENT LOSS Pecos Revenues Operating expenses Amortization of intangibles Goodwill impairment loss Income of Suaro Net income Retained earningsPecos, 1/1 Retained earningsSuaro, 1/1 Net income (above) Dividends paid Retained earnings, 12/31 Cash Receivables Inventory Investment in Suaro -1,052,000 821,000 Suaro 524,000 -115,000 178,000 -427,000 262,000 0 (E) 0 0 (I) -165,000 -655,000 0 178,000 200,000 -277,000 0 -201,000 (S) -165,000 35,000 -331,000 195,000 247,000 415,000 731,000 95,000 143,000 197,000 0 (D) 341,000 240,100 0 145,000 0 2,314,100 85,000 100,000 312,000 (A) 0 (A) 0 932,000 -1,537,100 -500,000 -277,000 -2,314,100 -251,000 -350,000 (S) -331,000 -932,000 Consolidation Entries Debit Credit Consolidated Totals -1,479,000 1,083,000 50,000 524,000 0 178,000 50000 115,000 201,000 (D) 35,000 35,000 (S) (A) (I) 551,000 100,000 115,000 (A) 10,000 50000 (E) 50,000 -655,000 0 178,000 200,000 -277,000 290,000 390,000 612,000 0 Consolidated Worksheet (continued) Land Equipment (net) Software Other intangibles Brand name Goodwill Total assets Liabilities Common stock Retained earnings (above) Total liabilities and equity Shaded items were provided on the Consolidated Information Worksheet 60000 350000 861,000 861,000 416,000 340,100 312,000 145,000 60,000 0 1,273,100 -1,788,100 -500,000 -277,000 -2,565,100 Group Project Grading Rubric ACC 405 Advanced Accounting Computer Project - Chapter 3, Pages 138-141 Points Possible Points Assigned Comments Group Discussions about Project The members of the group identified, assigned, discussed, and completed the group project. Correct Answers on Each of the Required Worksheet in the Student Excel Template Fair Value Allocation Schedule-2009 Fair Value Allocation Schedule-2010 Equity Method Initial Value Method Partial Equity Method Goodwill Impairment Equity Method with Goodwill Impairment Grand Total Individual Student Members of each Group may receive less than the total group Points awarded if their contributions to the group are not deemed adaquate by the Instructor 10 5 5 20 20 20 10 20 110 0