Priya Corporation acquired 100 percent of Sheldon Company stock on January 1, 2020 for $954,000 cash. Following are pre-closing trial balance amounts for Priya Corporation and Sheldon Company as of December 31, 2020: PRIYA CORPORATION SHELDON COMPANY Debit Credit Debit Credit Cash $ 549,600 $ 226,700 Accounts Receivable 294,000 194,000 Inventory 473,000 159,000 Investment in Sheldon Corp.. 991,700 Buildings 625,000 196,000 Land 790,000 238,000 Equipment 531,000 223,000 Cost of Goods Sold 382,000 219,000 Depreciation Expense, Building 62,500 12,900 Depreciation Expense, Equipment 53,100 32,400 Selling & Administrative Expense 173,000 118,600 Dividends Declared 80,000 55,000 Accumulated Depreciation, Bldg $ 187,500 $ 38,700 Accumulated Depreciation, Equip 318,600 129,600 Accounts Payable 178,000 174,900 Bonds Payable 500,000 78,400 Common Stock ($1 par) 650,000 238,000 Additional Paid In Capital 1,528,200 317,000 Retained Earnings (01/01/2020) 809,000 195,000 Sales 740,900 503,000 Income from Sheldon Corp. 92,700 $ 5,004,900 $ 5,004,900 $ 1,674,600 $ 1,674,600 Additional Information: 1. On January 1, 2020 the fair market value of Sheldon's assets equaled their book value with the exception of: Inventory - was overvalued by $9,000 (all this inventory was sold during 2020). Building - was overvalued by $36,000 (remaining useful life was estimated to be 18 years). Land - was by undervalued $57,000. Equipment - was undervalued by $78,000 (remaining useful life was estimated to be 5 years). The new Goodwill from the acquisition was impaired by $22,800 at year-end. 2. Priya Corporation uses the (full) equity method to account for its Investment in Sheldon Company. 3. The general ledger numbers given above (HINT: those in boldface) include the effects of the JOURNAL ENTRIES that were recorded by Priya at the acquisition date and during 2020 to account for its investment in Sheldon 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 Sheldon 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. IN ORDER TO RECEIVE FULL CREDIT FOR YOUR ANSWER, BE SURE TO CLEARLY LABEL YOUR DETAIL FOR THE IDENTIFIABLE EXCESS, INCLUDING THE ASSET NAME AND WHETHER THE ASSET IS UNDERVALUED OR OVERVALUED. REQUIRED: CLEARLY SHOW ALL OF YOUR WORK). a. Prepare the Investment Analysis for Priya Company's Investment in Sheldon account AT JANUARY 1, 2020 (10 POINTS) Fair Value of Consideration given from Priya Company to Sheldon's Shareholders: $ MINUS: Book Value of Sheldon Company's Net Identifiable Assets $ EQUALS: Differential (= Excess Value). $ MINUS: Net Identifiable Excess $ EQUALS: NEW GOODWILL $ b. Recreate the 4 JOURNAL ENTRIES recorded by Priya with regard to its investment in Sheldon Company at January 1, 2020 and during 2020. IN ORDER TO RECEIVE FULL CREDIT FOR YOUR ANSWER, BE SURE TO SHOW YOUR WORK FOR THE NUMBERS INCLUDED IN THE AMORTIZATION OF EXCESS VALUE JOURNAL ENTRY. (10 POINTS) EXCESS COST: (OVERVALUED) OR "AMORTIZATION" THE RELATED UNDERVALUED AMOUNT EXPENSE ACCOUNT ASSET LIFE c. Using your information from b. above, calculate the 12/31/20 balances for Priya Company's Investment in Sheldon and Income from Sheldon accounts. Use the Taccounts provided below. USE THIS AS A CHECK BEFORE PROCEEDING. (O POINTS) Priya Company's General Ledger Investment in Sheldon Income from Sheldon d. Prepare the 3 REQUIRED CONSOLIDATION WORKSHEET ENTRIES (BCE, AEVRE, & EVRE) at December 31, 2020. (40 POINTS) IN ORDER TO RECEIVE FULL CREDIT FOR YOUR ANSWERS, BE SURE TO CLEARLY SHOW ALL OF YOUR CALCULATIONS. BASIC CONSOLIDATION ENTRY (6 POINTS): AMORTIZATION OF EXCESS VALUE RECLASSIFICATION ENTRY (13 POINTS): (REMAINING) EXCESS VALUE RECLASSIFICATION ENTRY (21 POINTS): e. Prepare the consolidation worksheet for the period ended December 31, 2020. You may use the template provided below OR the template on the next page. (40 POINTS) PRIYA CORPORATION Consolidation Worksheet For the Period Ending December 31, 2020 Consolidated PRIYA'S G/L SHELDON'S G/L CONSOLIDATION ENTRIES Debit Credit Accounts Totals $ 1,243,900 Income Statement Sales Less: Cost of Goods Sold Less: Depreciation Expense, Building Less: Depreciation Expense, Equipment Less: Selling & Administrative Expense Less: Goodwill Impairment Loss Income from Sheldon Corp. Net Income $ $ $ $ $ 740,900 (382,000) (62,500) (53,100) (173,000) $ $ $ $ $ 503,000 (219,000) ( (12,900) (32,400) (118,600) $ (291,600) $ $ 92,700 163,000 $ 120,100 Statement of Retained Earnings Retained Earnings (01/01/2020) Net income (above) Dividends Declared Retained earnings, 12/31/20 $ $ $ $ 809,000 163,000 (80,000) 892,000 $ $ $ $ 195,000 120,100 (55,000) 260,100 Balance Sheet Cash Accounts Receivable Inventory Investment in Sheldon Corp. $ $ $ $ 549,600 294,000 473,000 991,700 $ $ $ 226,700 194,000 159,000 $ $ $ 776,300 488,000 632,000 Buildings Land Equipment Accumulated Depreciation, Bldg Accumulated Depreciation, Equip Goodwill (NEW) Total Assets $ $ $ $ $ 625,000 790,000 531,000 (187,500) (318,600) $ $ $ $ $ 196,000 238,000 223,000 (38,700) (129,600) $ 3,748,200 $ 1,068,400 $ $ 352,900 578,400 Accounts Payable $ Bonds Payable $ Common Stock ($1 par) $ Additional Paid In Capital $ Retained earnings, 12/31/20 (above) $ Total Liabilities & Stockholders' Equity $ 178,000 500,000 650,000 1,528,200 892,000 3,748,200 $ $ $ $ $ $ 174,900 78,400 238,000 317,000 260,100 1,068,400 $ 1,136,700 $ 1,136,700 NET ASSETS ASSETS - LIABILITIES TOTAL STOCKHOLDERS' EQUITY Priya Corporation acquired 100 percent of Sheldon Company stock on January 1, 2020 for $954,000 cash. Following are pre-closing trial balance amounts for Priya Corporation and Sheldon Company as of December 31, 2020: PRIYA CORPORATION SHELDON COMPANY Debit Credit Debit Credit Cash $ 549,600 $ 226,700 Accounts Receivable 294,000 194,000 Inventory 473,000 159,000 Investment in Sheldon Corp.. 991,700 Buildings 625,000 196,000 Land 790,000 238,000 Equipment 531,000 223,000 Cost of Goods Sold 382,000 219,000 Depreciation Expense, Building 62,500 12,900 Depreciation Expense, Equipment 53,100 32,400 Selling & Administrative Expense 173,000 118,600 Dividends Declared 80,000 55,000 Accumulated Depreciation, Bldg $ 187,500 $ 38,700 Accumulated Depreciation, Equip 318,600 129,600 Accounts Payable 178,000 174,900 Bonds Payable 500,000 78,400 Common Stock ($1 par) 650,000 238,000 Additional Paid In Capital 1,528,200 317,000 Retained Earnings (01/01/2020) 809,000 195,000 Sales 740,900 503,000 Income from Sheldon Corp. 92,700 $ 5,004,900 $ 5,004,900 $ 1,674,600 $ 1,674,600 Additional Information: 1. On January 1, 2020 the fair market value of Sheldon's assets equaled their book value with the exception of: Inventory - was overvalued by $9,000 (all this inventory was sold during 2020). Building - was overvalued by $36,000 (remaining useful life was estimated to be 18 years). Land - was by undervalued $57,000. Equipment - was undervalued by $78,000 (remaining useful life was estimated to be 5 years). The new Goodwill from the acquisition was impaired by $22,800 at year-end. 2. Priya Corporation uses the (full) equity method to account for its Investment in Sheldon Company. 3. The general ledger numbers given above (HINT: those in boldface) include the effects of the JOURNAL ENTRIES that were recorded by Priya at the acquisition date and during 2020 to account for its investment in Sheldon 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 Sheldon 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. IN ORDER TO RECEIVE FULL CREDIT FOR YOUR ANSWER, BE SURE TO CLEARLY LABEL YOUR DETAIL FOR THE IDENTIFIABLE EXCESS, INCLUDING THE ASSET NAME AND WHETHER THE ASSET IS UNDERVALUED OR OVERVALUED. REQUIRED: CLEARLY SHOW ALL OF YOUR WORK). a. Prepare the Investment Analysis for Priya Company's Investment in Sheldon account AT JANUARY 1, 2020 (10 POINTS) Fair Value of Consideration given from Priya Company to Sheldon's Shareholders: $ MINUS: Book Value of Sheldon Company's Net Identifiable Assets $ EQUALS: Differential (= Excess Value). $ MINUS: Net Identifiable Excess $ EQUALS: NEW GOODWILL $ b. Recreate the 4 JOURNAL ENTRIES recorded by Priya with regard to its investment in Sheldon Company at January 1, 2020 and during 2020. IN ORDER TO RECEIVE FULL CREDIT FOR YOUR ANSWER, BE SURE TO SHOW YOUR WORK FOR THE NUMBERS INCLUDED IN THE AMORTIZATION OF EXCESS VALUE JOURNAL ENTRY. (10 POINTS) EXCESS COST: (OVERVALUED) OR "AMORTIZATION" THE RELATED UNDERVALUED AMOUNT EXPENSE ACCOUNT ASSET LIFE c. Using your information from b. above, calculate the 12/31/20 balances for Priya Company's Investment in Sheldon and Income from Sheldon accounts. Use the Taccounts provided below. USE THIS AS A CHECK BEFORE PROCEEDING. (O POINTS) Priya Company's General Ledger Investment in Sheldon Income from Sheldon d. Prepare the 3 REQUIRED CONSOLIDATION WORKSHEET ENTRIES (BCE, AEVRE, & EVRE) at December 31, 2020. (40 POINTS) IN ORDER TO RECEIVE FULL CREDIT FOR YOUR ANSWERS, BE SURE TO CLEARLY SHOW ALL OF YOUR CALCULATIONS. BASIC CONSOLIDATION ENTRY (6 POINTS): AMORTIZATION OF EXCESS VALUE RECLASSIFICATION ENTRY (13 POINTS): (REMAINING) EXCESS VALUE RECLASSIFICATION ENTRY (21 POINTS): e. Prepare the consolidation worksheet for the period ended December 31, 2020. You may use the template provided below OR the template on the next page. (40 POINTS) PRIYA CORPORATION Consolidation Worksheet For the Period Ending December 31, 2020 Consolidated PRIYA'S G/L SHELDON'S G/L CONSOLIDATION ENTRIES Debit Credit Accounts Totals $ 1,243,900 Income Statement Sales Less: Cost of Goods Sold Less: Depreciation Expense, Building Less: Depreciation Expense, Equipment Less: Selling & Administrative Expense Less: Goodwill Impairment Loss Income from Sheldon Corp. Net Income $ $ $ $ $ 740,900 (382,000) (62,500) (53,100) (173,000) $ $ $ $ $ 503,000 (219,000) ( (12,900) (32,400) (118,600) $ (291,600) $ $ 92,700 163,000 $ 120,100 Statement of Retained Earnings Retained Earnings (01/01/2020) Net income (above) Dividends Declared Retained earnings, 12/31/20 $ $ $ $ 809,000 163,000 (80,000) 892,000 $ $ $ $ 195,000 120,100 (55,000) 260,100 Balance Sheet Cash Accounts Receivable Inventory Investment in Sheldon Corp. $ $ $ $ 549,600 294,000 473,000 991,700 $ $ $ 226,700 194,000 159,000 $ $ $ 776,300 488,000 632,000 Buildings Land Equipment Accumulated Depreciation, Bldg Accumulated Depreciation, Equip Goodwill (NEW) Total Assets $ $ $ $ $ 625,000 790,000 531,000 (187,500) (318,600) $ $ $ $ $ 196,000 238,000 223,000 (38,700) (129,600) $ 3,748,200 $ 1,068,400 $ $ 352,900 578,400 Accounts Payable $ Bonds Payable $ Common Stock ($1 par) $ Additional Paid In Capital $ Retained earnings, 12/31/20 (above) $ Total Liabilities & Stockholders' Equity $ 178,000 500,000 650,000 1,528,200 892,000 3,748,200 $ $ $ $ $ $ 174,900 78,400 238,000 317,000 260,100 1,068,400 $ 1,136,700 $ 1,136,700 NET ASSETS ASSETS - LIABILITIES TOTAL STOCKHOLDERS' EQUITY