Question 3 (10 marks) Panorama Corporation acquired 80% of Scann Corporation shares on January 1, 2019 for $1,400,000 cash, when Scann's stockholders equity was $1,250,000.
Question 3 (10 marks) Panorama Corporation acquired 80% of Scann Corporation shares on January 1, 2019 for $1,400,000 cash, when Scann's stockholders equity was $1,250,000. On that date, the book value of Scann's assets and liabilities was equal to the fair value except for equipment that had a book value of $105,000 and fair value of $150,000 and had a remaining useful life of 5 years from January 1, 2019. Any other excess would be assigned to goodwill. The separate net income of Panorama Corporation and Scann Corporation for the year ended December 31, 2019 was $180,000 and $120,000 respectively. Required: 1. Calculate the Excess of Fair value over book value at January 1, 2019. 2. Calculate the amount of goodwill on the consolidated balance sheet at January 1, 2019. 3. Calculate the amount of equipment on the consolidated balance sheet at January 1, 2019. 4. Calculate the consolidated net income for the year ended December 31, 2019. 
Par Corporation acquired a 70 percent interest in Sol Corporation's common stock on January 1, 2011, for $490,000 cash. The stockholders' equity of Sol on this date consisted of $500,000 capital stock and $100,000 retained earnings. The difference between the fair value of Sol and the underlying equity acquired in Sol was assigned $5,000 to Sol's undervalued inventory, $14,000 to overvalued buildings, $21,000 to undervalued equipment, and remaining amount to goodwill. The undervalued inventory items were sold during 2011, and the overvalued buildings and undervalued equipment had remaining useful lives of seven years and three years, respectively. Depreciation is straight line. At December 31, 2011, Sol's accounts payable include $10,000 owed to Par. Separate financial statements for Par and Sol for 2011 are summarized as follows (in thousands): Par Sol $700 Combined Income and Retained Earnings Statements for the Year Ended December 31 Sales Income from Sol Gain on equipment Cost of sales Depreciation expense Other expenses Net income Add: Retained earnings January 1 Deduct: Dividends Retained earnings December 31 $ 800 60.2 10 (300) (155) (160) 255.2 300 (200) $ 355.2 (400) (60) (140) 100 100 (50) $150 $ 96 $ 60 100 70 14 150 100 Balance Sheet at December 31 Cash Accounts receivablenet Dividends receivable Inventories Other current assets Land Buildings-net Equipment-net Investment in Sol Total assets 30 100 160 330 140 570 515.2 $1,705.2 $850 $ 85 20 95 Accounts payable Dividends payable Other liabilities Capital stock, $10 par Retained earnings Total equities $ 200 100 50 1.000 355.2 $1,705.2 500 150 $850 Required: Using equity method, Prepare the required elimination entries on December 31, 2011. Show your computations Par Corporation acquired a 70 percent interest in Sol Corporation's common stock on January 1, 2011, for $490,000 cash. The stockholders' equity of Sol on this date consisted of $500,000 capital stock and $100,000 retained earnings. The difference between the fair value of Sol and the underlying equity acquired in Sol was assigned $5,000 to Sol's undervalued inventory, S14,000 to overvalued buildings, $21,000 to undervalued equipment, and remaining amount to goodwill. The undervalued inventory items were sold during 2011, and the overvalued buildings and undervalued equipment had remaining useful lives of seven years and three years, respectively. Depreciation is straight line. At December 31, 2011, Sol's accounts payable include $10,000 owed to Par. Separate financial statements for Par and Sol for 2011 are summarized as follows in thousands): Par Sol $ $700 Combined Income and Retained Earnings Statements for the Year Ended December 31 Sales Income from Sol Gain on equipment Cost of sales Depreciation expense Other expenses Net income Add: Retained earnings January 1 Deduct: Dividends Retained earnings December 31 800 60.2 10 (300) (155) (160) 255.2 300 (200) (400) (60) (140) 100 100 (50) SISO 355.2 S60 96 100 70 Balance Sheet at December 31 Cash Accounts receivable-net Dividends receivable Inventories Other current assets Land Buildingsnet Equipment-net Investment in Sol Total assets 50 140 570 515.2 $1,705.2 100 30 100 160 330 $850 $ 85 20 Accounts payable Dividends payable Other liabilities Capital stock, $10 par Retained earnings Total equities $ 200 100 50 1,000 355.2 $1,705.2 $850 Required: Using equity method, Prepare the required elimination entries on December 31, 2011. Show your computations
