Priya Corporation acquired 80 percent of Sheldon Company stock on January 1, 2020 for $701,600 cash. The fair market value of the 20 percent noncontrolling interest on this date was $175,400. Following are trial balances of Priya Corporation and Sheldon Company as of December 31, 2020: PRIYA CORPORATION SHELDON COMPANY Debit Credit Debit Credit Cash $ 762,000 $ 221,000 Accounts Receivable $ 294,000 $ 204,000 Inventory $ 473,000 $ 159,000 Investment in Sheldon Corp. $ 736,000 $ Buildings $ 625,000 $ 296,000 Land $ 773,900 $ 195,900 Equipment $ 531,000 $ 276,000 Cost of Goods Sold $ 382,000 $ 234,000 Depreciation Expense, Building $ 62,500 $ 41,700 Depreciation Expense, Equipment $ 53,100 $ 23,100 Selling & Administrative Expense $ 173,000 $ 157,200 Dividends Declared $ 68,000 $ 50,000 Accumulated Depreciation, Bldg $ 187,500 $ 166,800 Accumulated Depreciation, Equip $ 265,500 $ 115,500 Accounts Payable $ 178,000 $ 174,900 Bonds Payable $ 500,000 $ 108,700 Common Stock ($1 par) $ 600,000 $ 165,000 Additional Paid In Capital $ 1,578,200 $ 309,000 Retained Earnings (01/01/2020) $ 809,000 $ 246,000 Sales $ 740,900 $ 572,000 Income from Sheldon Corp. $ 74,400 $ $ 4,933,500 $ 4,933,500 $ 1,857,900 $ 1,857,900 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 $11,000 (all of this inventory was sold during 2020). Building - was undervalued by $88,000 (remaining useful life was estimated to be 4 years). Land - was by undervalued $29,000. Equipment - was overvalued by $24,000 (remaining useful life was estimated to be 8 years). The new Goodwill from the acquisition was impaired by $15,000 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: 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. FOR FULL CREDIT (AND JUST AS YOU DID FOR ASSIGNMENT 2) PLEASE BE SURE TO CLEARLY LABEL YOUR DETAIL. (4 POINTS) Fair Value of Consideration given from Priya Company to Sheldon's Shareholders: $ PLUS: Fair Value of Any Noncontrolling Interest $ EQUALS: Total Fair Value MINUS: Book Value of Sheldon Company's Net Identifiable Assets $ EQUALS: Differential ( = Excess Value) $ MINUS: Identifiable Excess $ EQUALS: New Goodwill $ b. Recreate the 4 JOURNAL ENTRIES recorded by Priya with regard to its investment in Sheldon Company on January 1, 2020 and during 2020. AS IN ASSIGNMENT 2, TO RECEIVE FULL CREDIT PLEASE BE SURE TO SHOW YOUR DETAILED WORK FOR YOUR JOURNAL ENTRY AMOUNTS. THAT WORK IS WORTH 3 POINTS. (7 POINTS) 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 T accounts provided below. (2 POINTS) Priya Company's General Ledger Investment in Sheldon Income from Sheldon d. Prepare the 3 REQUIRED CONSOLIDATION WORKSHEET ENTRIES (BCE, AEVRE, & EVRE) on December 31, 2020. 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 SHELDON AND INVESTMENT IN SHELDON. 8 POINTS ARE ASSIGNED TO THIS WORK. (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, 2020. You may use the template provided below OR the template on the next page. (12 POINTS) PRIYA CORPORATION Consolidation Worksheet For the Period Ending December 31, 2020 PRIYA'S G/L SHELDON'S G/L CONSOLIDATION ENTRIES Debit Credit Consolidated Totals Accounts L 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. Consolidated Net Income NCI in Net Income Controlling Interest in Net Income $ $ $ $ $ 740,900 $ (382,000) $ (62,500) S (53,100) S (173,000) $ 572,000 (234,000) (41,700) (23,100) (157,200) $ $ 74,400 144,700 $ 116,000 $ 144,700 $ 116,000 Statement of Retained Earnings Retained Earnings (01/01/2020) Net income (above) Dividends Declared Retained earnings, 12/31/20 $ S $ $ 809,000 $ 144,700 $ (68,000) $ 885,700 $ 246,000 116,000 (50,000) 312,000 Balance Sheet Cash Accounts Receivable Inventory Investment in Sheldon Corp. $ $ $ $ 762,000 294,000 473,000 736,000 $ $ $ 221,000 204,000 159,000 $ Buildings Land Equipment Accumulated Depreciation, Bldg Accumulated Depreciation, Equip Goodwill (NEW) Total Assets S S $ S $ 625,000 S 773,900 $ 531,000 S (187,500) $ (265,500) $ 296,000 195,900 276,000 (166,800) (115,500) $ 3,741,900 $ 1,069,600 174,900 108,700 Accounts Payable Bonds Payable Common Stock ($1 par) Additional Paid In Capital Retained earnings, 12/31/20 (above) NCI in Net Assets $ $ $ $ S s $ 178,000 500,000 600,000 1,578,200 885,700 S $ s $ S 165,000 309,000 312,000 Total Liabilities & Stockholders' Equity $ 3,741,900 S 1,069,600 NET ASSETS ASSETS - LIABILITIES (CONTROLLING INTEREST) ASSETS - LIABILITIES - NCINA - TOTAL STOCKHOLDERS' EQUITY TOTAL STOCKHOLDERS' EQUITY (CONTROLLING INTEREST) ** OR ** PRIYA CORPORATION Consolidation Worksheet For the Period Ending December 31, 2020 PRIYA'S G/L SHELDON'S G/L CONSOUDATION ENTRIES Debit Credit Consolidated Totals Accounts $ S $ S 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. Consolidated Net Income NCI in Net Income Controlling Interest in Net Income 740,900 $ (382,000) $ (62,500) $ (53,100) $ (173,000) $ 572,000 (234,000) (41,700) (23,100) (157,200) $ $ $ $ 74,400 144,700 $ 116,000 S 144,700 $ 116,000 Statement of Retained Earnings Retained Earnings (01/01/2020) Net income (above) Dividends Declared Retained earnings, 12/31/20 S $ $ $ 809,000 S 144,700 $ (68,000) $ 885,700 $ 246,000 116,000 (50,000) 312,000 Balance Sheet Cash Accounts Receivable Inventory Investment in Sheldon Corp. S S $ $ 762,000 294,000 473.000 736,000 $ $ $ 221,000 204,000 159,000 $ Buildings Land Equipment Accumulated Depreciation, Bldg Accumulated Depreciation, Equip Goodwill (NEW) Total Assets S $ $ 625,000 $ 773,900 $ 531,000 $ (187,500) $ (265,500) $ 296,000 195,900 276,000 (166,800) (115,500) S S 3,741,900 $ 1,069,600 Accounts Payable Bonds Payable Common Stock ($1 par) Additional Paid In Capital Retained earnings, 12/31/20 (above) NCI in Net Assets S $ $ $ S 178,000 500,000 600,000 1,578,200 885,700 S s $ S $ $ 174,900 108,700 165,000 309,000 312,000 Total Liabilities & Stockholders' Equity $ 3,741,900 $ 1,069,600 NET ASSETS (CONTROLLING INTEREST) ASSETS - LIABILITIES - NCINA ASSETS - LIABILITIES TOTAL STOCKHOLDERS' EQUITY TOTAL STOCKHOLDERS' EQUITY (CONTROLLING INTEREST) Priya Corporation acquired 80 percent of Sheldon Company stock on January 1, 2020 for $701,600 cash. The fair market value of the 20 percent noncontrolling interest on this date was $175,400. Following are trial balances of Priya Corporation and Sheldon Company as of December 31, 2020: PRIYA CORPORATION SHELDON COMPANY Debit Credit Debit Credit Cash $ 762,000 $ 221,000 Accounts Receivable $ 294,000 $ 204,000 Inventory $ 473,000 $ 159,000 Investment in Sheldon Corp. $ 736,000 $ Buildings $ 625,000 $ 296,000 Land $ 773,900 $ 195,900 Equipment $ 531,000 $ 276,000 Cost of Goods Sold $ 382,000 $ 234,000 Depreciation Expense, Building $ 62,500 $ 41,700 Depreciation Expense, Equipment $ 53,100 $ 23,100 Selling & Administrative Expense $ 173,000 $ 157,200 Dividends Declared $ 68,000 $ 50,000 Accumulated Depreciation, Bldg $ 187,500 $ 166,800 Accumulated Depreciation, Equip $ 265,500 $ 115,500 Accounts Payable $ 178,000 $ 174,900 Bonds Payable $ 500,000 $ 108,700 Common Stock ($1 par) $ 600,000 $ 165,000 Additional Paid In Capital $ 1,578,200 $ 309,000 Retained Earnings (01/01/2020) $ 809,000 $ 246,000 Sales $ 740,900 $ 572,000 Income from Sheldon Corp. $ 74,400 $ $ 4,933,500 $ 4,933,500 $ 1,857,900 $ 1,857,900 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 $11,000 (all of this inventory was sold during 2020). Building - was undervalued by $88,000 (remaining useful life was estimated to be 4 years). Land - was by undervalued $29,000. Equipment - was overvalued by $24,000 (remaining useful life was estimated to be 8 years). The new Goodwill from the acquisition was impaired by $15,000 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: 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. FOR FULL CREDIT (AND JUST AS YOU DID FOR ASSIGNMENT 2) PLEASE BE SURE TO CLEARLY LABEL YOUR DETAIL. (4 POINTS) Fair Value of Consideration given from Priya Company to Sheldon's Shareholders: $ PLUS: Fair Value of Any Noncontrolling Interest $ EQUALS: Total Fair Value MINUS: Book Value of Sheldon Company's Net Identifiable Assets $ EQUALS: Differential ( = Excess Value) $ MINUS: Identifiable Excess $ EQUALS: New Goodwill $ b. Recreate the 4 JOURNAL ENTRIES recorded by Priya with regard to its investment in Sheldon Company on January 1, 2020 and during 2020. AS IN ASSIGNMENT 2, TO RECEIVE FULL CREDIT PLEASE BE SURE TO SHOW YOUR DETAILED WORK FOR YOUR JOURNAL ENTRY AMOUNTS. THAT WORK IS WORTH 3 POINTS. (7 POINTS) 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 T accounts provided below. (2 POINTS) Priya Company's General Ledger Investment in Sheldon Income from Sheldon d. Prepare the 3 REQUIRED CONSOLIDATION WORKSHEET ENTRIES (BCE, AEVRE, & EVRE) on December 31, 2020. 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 SHELDON AND INVESTMENT IN SHELDON. 8 POINTS ARE ASSIGNED TO THIS WORK. (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, 2020. You may use the template provided below OR the template on the next page. (12 POINTS) PRIYA CORPORATION Consolidation Worksheet For the Period Ending December 31, 2020 PRIYA'S G/L SHELDON'S G/L CONSOLIDATION ENTRIES Debit Credit Consolidated Totals Accounts L 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. Consolidated Net Income NCI in Net Income Controlling Interest in Net Income $ $ $ $ $ 740,900 $ (382,000) $ (62,500) S (53,100) S (173,000) $ 572,000 (234,000) (41,700) (23,100) (157,200) $ $ 74,400 144,700 $ 116,000 $ 144,700 $ 116,000 Statement of Retained Earnings Retained Earnings (01/01/2020) Net income (above) Dividends Declared Retained earnings, 12/31/20 $ S $ $ 809,000 $ 144,700 $ (68,000) $ 885,700 $ 246,000 116,000 (50,000) 312,000 Balance Sheet Cash Accounts Receivable Inventory Investment in Sheldon Corp. $ $ $ $ 762,000 294,000 473,000 736,000 $ $ $ 221,000 204,000 159,000 $ Buildings Land Equipment Accumulated Depreciation, Bldg Accumulated Depreciation, Equip Goodwill (NEW) Total Assets S S $ S $ 625,000 S 773,900 $ 531,000 S (187,500) $ (265,500) $ 296,000 195,900 276,000 (166,800) (115,500) $ 3,741,900 $ 1,069,600 174,900 108,700 Accounts Payable Bonds Payable Common Stock ($1 par) Additional Paid In Capital Retained earnings, 12/31/20 (above) NCI in Net Assets $ $ $ $ S s $ 178,000 500,000 600,000 1,578,200 885,700 S $ s $ S 165,000 309,000 312,000 Total Liabilities & Stockholders' Equity $ 3,741,900 S 1,069,600 NET ASSETS ASSETS - LIABILITIES (CONTROLLING INTEREST) ASSETS - LIABILITIES - NCINA - TOTAL STOCKHOLDERS' EQUITY TOTAL STOCKHOLDERS' EQUITY (CONTROLLING INTEREST) ** OR ** PRIYA CORPORATION Consolidation Worksheet For the Period Ending December 31, 2020 PRIYA'S G/L SHELDON'S G/L CONSOUDATION ENTRIES Debit Credit Consolidated Totals Accounts $ S $ S 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. Consolidated Net Income NCI in Net Income Controlling Interest in Net Income 740,900 $ (382,000) $ (62,500) $ (53,100) $ (173,000) $ 572,000 (234,000) (41,700) (23,100) (157,200) $ $ $ $ 74,400 144,700 $ 116,000 S 144,700 $ 116,000 Statement of Retained Earnings Retained Earnings (01/01/2020) Net income (above) Dividends Declared Retained earnings, 12/31/20 S $ $ $ 809,000 S 144,700 $ (68,000) $ 885,700 $ 246,000 116,000 (50,000) 312,000 Balance Sheet Cash Accounts Receivable Inventory Investment in Sheldon Corp. S S $ $ 762,000 294,000 473.000 736,000 $ $ $ 221,000 204,000 159,000 $ Buildings Land Equipment Accumulated Depreciation, Bldg Accumulated Depreciation, Equip Goodwill (NEW) Total Assets S $ $ 625,000 $ 773,900 $ 531,000 $ (187,500) $ (265,500) $ 296,000 195,900 276,000 (166,800) (115,500) S S 3,741,900 $ 1,069,600 Accounts Payable Bonds Payable Common Stock ($1 par) Additional Paid In Capital Retained earnings, 12/31/20 (above) NCI in Net Assets S $ $ $ S 178,000 500,000 600,000 1,578,200 885,700 S s $ S $ $ 174,900 108,700 165,000 309,000 312,000 Total Liabilities & Stockholders' Equity $ 3,741,900 $ 1,069,600 NET ASSETS (CONTROLLING INTEREST) ASSETS - LIABILITIES - NCINA ASSETS - LIABILITIES TOTAL STOCKHOLDERS' EQUITY TOTAL STOCKHOLDERS' EQUITY (CONTROLLING INTEREST)