Question 1: (50 points) Problem Company spent $102,000 to acquire 85% of Solution Company's stock on January 1, 2018. The fair value of the non-controlling interest was determined to be $18,000 at that date. The book value of Solution's net assets at acquisition was $90,000. The book values and fair values of Solution's assets and liabilities were equal, except for Solution's building and equipment, which were worth $20,000 more than book value. Accumulated depreciation on the building and equipment was $30,000 on the acquisition date. Buildings and equipment are depreciated on a 5- year basis. Although goodwill is not amortized, the management of Problem concluded at December 31, 2018, that goodwill from its purchase of Solution shares had been impaired by $5,500. Goodwill and goodwill impairment were assigned proportionately to the controlling and non-controlling shareholders. Item Problem Company Debit Credit Solution Company Debit Credit $ $ $ $ Cash 33,700 30,000 Accounts Receivable 67,000 9,000 Inventory 90,000 25,000 Land 42,400 15,000 Buildings & Equipment 350,000 150,000 Investment in Solution Company 105,825 Cost of Goods Sold 125,000 110,000 42,000 27,000 25,000 10,000 Wages Expenses Depreciation Expense Interest & Other Expenses Dividends Declared 25,500 9,000 30,000 16,000 145,000 40,000 Accumulated Depreciation Accounts Payable 45,000 21,000 17,000 9,000 Wages Payable Notes Payable 150,000 55,000 Common Stock 200,000 60,000 Retained Earnings 102,000 30,000 Sales 260,000 186,000 Income from Solution Company 17,425 936,425 936,425 401,000 401,000 Required: A. Give the equity method journal entries recorded by Paste. (10 points) B. Prepare the book value calculation table in order to prepare consolidated financial statements at December 31, 2018. (10 points) C. Give the basic consolidation entry at December 31, 2018. (10 points) D. Prepare the excess value (differential) calculation table in order to prepare consolidated financial statements at December 31, 2018. (5 points) E. Give excess value (differential) reclassification entries at December 31, 2018. (5 points) F. Give amortized excess value reclassification entry at December 31, 2018 (5 points) G. Prepare the accumulated depreciation consolidation entry needed at December 31, 2018. (5 points) Question 1: (50 points) Problem Company spent $102,000 to acquire 85% of Solution Company's stock on January 1, 2018. The fair value of the non-controlling interest was determined to be $18,000 at that date. The book value of Solution's net assets at acquisition was $90,000. The book values and fair values of Solution's assets and liabilities were equal, except for Solution's building and equipment, which were worth $20,000 more than book value. Accumulated depreciation on the building and equipment was $30,000 on the acquisition date. Buildings and equipment are depreciated on a 5- year basis. Although goodwill is not amortized, the management of Problem concluded at December 31, 2018, that goodwill from its purchase of Solution shares had been impaired by $5,500. Goodwill and goodwill impairment were assigned proportionately to the controlling and non-controlling shareholders. Item Problem Company Debit Credit Solution Company Debit Credit $ $ $ $ Cash 33,700 30,000 Accounts Receivable 67,000 9,000 Inventory 90,000 25,000 Land 42,400 15,000 Buildings & Equipment 350,000 150,000 Investment in Solution Company 105,825 Cost of Goods Sold 125,000 110,000 42,000 27,000 25,000 10,000 Wages Expenses Depreciation Expense Interest & Other Expenses Dividends Declared 25,500 9,000 30,000 16,000 145,000 40,000 Accumulated Depreciation Accounts Payable 45,000 21,000 17,000 9,000 Wages Payable Notes Payable 150,000 55,000 Common Stock 200,000 60,000 Retained Earnings 102,000 30,000 Sales 260,000 186,000 Income from Solution Company 17,425 936,425 936,425 401,000 401,000 Required: A. Give the equity method journal entries recorded by Paste. (10 points) B. Prepare the book value calculation table in order to prepare consolidated financial statements at December 31, 2018. (10 points) C. Give the basic consolidation entry at December 31, 2018. (10 points) D. Prepare the excess value (differential) calculation table in order to prepare consolidated financial statements at December 31, 2018. (5 points) E. Give excess value (differential) reclassification entries at December 31, 2018. (5 points) F. Give amortized excess value reclassification entry at December 31, 2018 (5 points) G. Prepare the accumulated depreciation consolidation entry needed at December 31, 2018. (5 points)