Refer to the preceding information for Pcraft?s acquisition of Sailair?s common stock. As-sume that Pcraft paid $500,000 for 100% of Sailair common stock. Pcraft uses the cost methodto account for its investment in Sailair. Pcraft and Sailair had the following trial balances on De-cember 31, 20X3: Pcraft (first number) and Sailair (second set of numbers) PcraftSailairCash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .80,00060,000 Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .90,00055,000Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .120,00086,000Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .100,00060,000Investment in Sailair . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .500,000Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .800,000300,000Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(220,000)(80,000)Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .150,000100,000Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(90,000)(72,000)Current Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(60,000)(102,000)Bonds Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(100,000)Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(100,000)(10,000)Paid-In Capital in Excess of Par . . . . . . . . . . . . . . . . . . . . . . . . . . . .(900,000)(90,000)Retained Earnings, Jan. 1, 20X3 . . . . . . . . . . . . . . . . . . . . . . . . . . .(315,000)(182,000)Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(800,000)(350,000)Cost of Goods Sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .450,000210,000Depreciation Expense?Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . .30,00015,000Depreciation Expense?Equipment . . . . . . . . . . . . . . . . . . . . . . . . . .15,00014,000Other Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .140,00068,000Interest Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8,000Dividend Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(10,000)Dividends Declared . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20,00010,000Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .00 1.Prepare a zone analysis and a determination and distribution of excess schedule for the in-vestment in Sailair. 2.Complete a consolidated worksheet for Pcraft Corporation and its subsidiary Sailair Corpo-ration as of December 31, 20X3. Prepare supporting amortization and income distribution schedules On the attached spreadsheet it is the last 3 tabs. Please

Name of Company Being Acquired Date of Acquisition Jansen July 1, 20X6 Book Current Assets Accounts Receivable Allowance for doubtful accounts Inventory Prepaid Insurance Total Current Assets Investments Fixed Assets Land Machinery and equipment (net) Priority 1,250,000 (300,000.00) 1,500,000 18,000 2,468,000 400,500 1 1 1 1 1 58,000 1,473,500 Total Fixed Assets Intangibles Market 2 2 2 2 1,531,500 2 2 2 2 2 Goodwill Total Intangibles Total Assets 100,000 N 100,000 4,500,000 Purchase Price Cash Number of Shares exchanged Par Value of a share of stock Market Value of a share of stock Market Value of stock exchanged Direct acquisition costs Incurred Total purchase Price Book Current Liabilities 1,250,000 Current Liabilities 337,500.00 1,200,000 18,000 2,805,500 Total Current Liabilities 400,500 Other Liabilities 1,475,000 1,731,000 1,911,875 Price Paid Assign to Priority Assign to Nonpriority Goodwill Extraordinary Gain 70,000 1,841,875 1,475,000 1,475,000 1,200,000 1,825,000 2,580,000 2,496,400 Total Equity 3,025,000 5,076,400 4,500,000 6,551,400 3,642,875 5,117,875 Total Liabilities and Equity Net Assets Cumulative Group Total 1,731,000 3,642,875 Amount to Percentage Allocate Market (Fair) Value Total Priority Nonpriority Accounts Land Machinery and equipment (net) Total Nonpriority Goodwill 1,250,000 337,500 1,200,000 18,000 400,500 (1,475,000) 1,731,000 70,000 1,841,875 1,911,875 609,125 Extraordinary Gain - Total (should equal purchase price) Land Machinery and equipment (net) - Check 1,911,875 1,911,875 1,911,875 1,911,875 1,911,875 1,911,875 1,911,875 1,911,875 1,911,875 70,000 1,841,875 1,911,875 609,125 4,252,000 Entry Account Name Accounts Receivable Allowance for doubtful accounts Inventory Prepaid Insurance Investments Current Liabilities Goodwill Extraordinary Gain Cash Common Stock Paid in Capital in Excess of Par Assigned or Allocated Amount 1,250,000 337,500 1,200,000 18,000 400,500 (1,475,000) 1,731,000 4% 96% 0% 0% 0% 0% 0% 0% 0% Debit (Credit) 1,250,000 337,500 1,200,000 18,000 400,500 (1,475,000) 70,000 1,841,875 609,125 (12,000) (160,000) (4,080,000) - 1,475,000 Total Other Liabilities 1,911,875 Total Liabilities Stockholders' Equity Common Stock Retained earnings 4,252,000 1,731,000 1,911,875 609,125 - Assignment and Allocation Schedule Priority Accounts Accounts Receivable Allowance for doubtful accounts Inventory Prepaid Insurance Investments Current Liabilities 1,475,000 1 1 1 1 Zone Analysis Group Total 1 1 1 1 1,475,000 16,000 10 265 4,240,000 12,000 4,252,000 Priority Nonpriority (2) Priority Market Name of Company Being Acquired Date of Acquisition Smith Dece,ber 31, 20X1 Book Priority Current Assets Notes Receivable Accounts receivable Inventory Other Current Assets Total Current Assets Investments Fixed Assets Land Building Equipment 24,000 56,000 31,000 18,000 129,000 65,000 Market 1 1 1 1 1 32,000 245,000 387,000 2 2 2 2 Total Fixed Assets Intangibles Patents Trade names 664,000 Goodwill Total Intangibles Total Assets 45,000 N 78,000 936,000 23,000 10,000 Purchase Price Cash Number of Shares exchanged Par Value of a share of stock Market Value of a share of stock Market Value of stock exchanged Direct acquisition costs Incurred Total purchase Price 2 2 2 2 2 Book Current Liabilities 24,000 Accounts payable 56,000 Payroll and benefit-related liabilities 30,000 Debt maturing in one year 15,000 125,000 Total Current Liabilities 63,000 Other Liabilities Long-term debt 55,000 Payroll and benefit-related liabilities 275,000 426,000 Total Other Liabilities 756,000 Total Liabilities Stockholders' Equity 20,000 Common Stock 15,000 Paid in capital in excess of par Retained earnings Total Equity 35,000 979,000 Total Liabilities and Equity Net Assets Zone Analysis (283,500) 791,000 Price Paid Assign to Priority Assign to Nonpriority Goodwill Extraordinary Gain Cumulative Group Total (283,500) 507,500 600,000 (283,500) 791,000 92,500 - Assignment and Allocation Schedule Priority Accounts Notes Receivable Accounts receivable Inventory Other Current Assets Investments Accounts payable Payroll and benefit-related liabilities Debt maturing in one year Amount to Percentage Allocate Market (Fair) Value Long-term debt Payroll and benefit-related liabilities Total Priority Nonpriority Accounts Land Building Equipment Patents Trade names Total Nonpriority Goodwill 24,000 56,000 30,000 15,000 63,000 (45,000) (12,500) (10,000) (248,000) (156,000) (283,500) 55,000 275,000 426,000 20,000 15,000 791,000 92,500 Extraordinary Gain - Total (should equal purchase price) Long-term debt Payroll and benefit-related liabilities Land Building Equipment Patents Trade names - Check 791,000 791,000 791,000 791,000 791,000 791,000 791,000 791,000 791,000 55,000 275,000 426,000 20,000 15,000 791,000 92,500 600,000 Entry Account Name Notes Receivable Accounts receivable Inventory Other Current Assets Investments Accounts payable Payroll and benefit-related liabilities Debt maturing in one year Goodwill Extraordinary Gain Cash Common Stock Paid in Capital in Excess of Par Assigned or Allocated Amount 24,000 56,000 30,000 15,000 63,000 (45,000) (12,500) (10,000) (248,000) (156,000) (283,500) 7% 35% 54% 0% 3% 2% 0% 0% 0% Debit (Credit) 24,000 56,000 30,000 15,000 63,000 (45,000) (12,500) (10,000) (248,000) (156,000) 55,000 275,000 426,000 20,000 15,000 92,500 (600,000) - 45,000 12,500 10,000 1 1 1 1 248,000 156,000 67,500 248,000 156,000 404,000 471,500 67,500 404,000 471,500 100,000 250,000 114,500 464,500 507,500 20,000 600,000 Group Total 1 1 1 1 936,000 580,000 Priority Nonpriority (2) 45,000 12,500 10,000 Priority Market Prob 3-2 D&D A 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 Problem 3-2 1 Common Information Ownership interest Price paid (including direct acquisition costs) Year of consolidation (1 = year of purchase) B C D E F G H Book Value Market Value Life Equity Method 80.00% 308,000 2 Acquired company's balance sheet before purchase Book Value Market Value Life Priority assets: Total priority assets - - Total liabilities 0 - - Stockholders' equity: Common stock Other paid-in capital Retained earnings Total equity 0 - - Mkt value of net assets - 0 Nonpriority accounts: Total nonpriority accounts Existing goodwill Total assets Zone Analysis Group Total Priority accounts Nonpriority accounts Ownership Portion 0 0 - Cumulative Total 0 0 0 0 Price Analysis Price = Assign to priority accounts Assign to nonpriority accounts Goodwill Extraordinary gain 308,000 0 full value Allocation Tables Priority accounts Market Total Percent Available Assign - Book Adjust - - - - - - - - - Nonpriority accounts Total Goodwill Extraordinary gain - - - Determination and Distribution of Excess Schedule Price paid for investment: Less book value interest acquired: Common stock Paid-in capital in excess of par Retained earnings Total equity Interest acquired Excess of cost over book value (debit) Allocated to: Total adjustments 80.00% Amortization - Page 1 Prob 3-2 Schedules A 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 B C D E F G Annual Amount Current Year Prior Years Total Key DR CR Problem 3-2 Schedules Amortization Schedules Year of consolidation 2 Account adjustments Life Total amortizations Income distribution schedules: Subsidiary: Internally generated net income Total NCI share Controlling share Parent Internally generated net income Controlling share of subsidiary #REF! Amortizations Total Page 2 Prob 3-2 Worksheet A 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 B C D E F G H I J K Consol Net Inc. NCI Control. R.E. Consol. Bal. Sht. Problem 3-2 (concluded) Year of consolidation Inventory, December 31 Other Current Assets Investment in Soll Land Buildings and Equipment Accumulated Depreciation Goodwill Other Intangibles Current Liabilities Bonds Payable Other Long-Term Liabilities Common StockPeres Other Paid-In CapitalPeres Retained EarningsPeres Common StockSoll Other Paid-In CapitalSoll Retained EarningsSoll Net Sales Cost of Goods Sold Operating Expenses Subsidiary Income Dividends DeclaredPeres Dividends DeclaredSoll Totals Consolidated net income NCI share Controlling share NCI Controlling retained earnings Totals 2 Trial Balance Peres Soll 100,000 50,000 148,000 180,000 50,000 350,000 (100,000) 20,000 (120,000) Eliminations Dr Cr 50,000 320,000 (60,000) (40,000) (100,000) (200,000) (200,000) (100,000) (214,000) (520,000) 300,000 120,000 (50,000) (100,000) (190,000) (450,000) 260,000 100,000 50,000 30,000 - Eliminations and Adjustments: Page 3 L Prob 3-10 D&D A 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 B C D E F G H Book Value Market Value Life Problem 3-10 Cost Method Common Information Ownership interest Price paid (including direct acquisition costs) Year of consolidation (1 = year of purchase) 100.00% 500,000 3 Acquired company's balance sheet before purchase Book Value Market Value Life Priority accounts: Total priority assets - - Total liabilities 0 - - Stockholders' equity: Common stock Paid-in capital in excess of par Retained earnings Total equity 0 - - Mkt value of net assets - 0 Nonpriority accounts: Total nonpriority assets Existing goodwill Total assets Zone Analysis Group Total Priority accounts Nonpriority accounts Ownership Portion 0 0 - Cumulative Total 0 0 0 0 Price Analysis Price = Assign to priority accounts Assign to nonpriority accounts Goodwill Extraordinary gain 500,000 0 full value Allocation Tables Priority Accounts Market Total Percent Available Assign - Book Adjust - - - - - - - - - Nonpriority Accounts Total Goodwill Extraordinary gain - - - Determination and Distribution of Excess Schedule Price paid for investment: Less book value interest acquired: Common stock Paid-in capital in excess of par Retained earnings Total equity Interest acquired Excess of cost over book value (debit) Adjustments : Total adjustments 100.00% Amortization - Page 4 Prob 3-10 Schedules A 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 B C D E F G Annual Amount Current Year Prior Years Total Key DR CR Problem 3-10 Schedules Amortization Schedules Year of consolidation Account adjustments 3 Life Total amortizations Income distribution schedules: Subsidiary: Internally generated net income Total NCI share Controlling share Parent Internally generated net income Controlling share of subsidiary Amortizations Total Page 5 Prob 3-10 Worksheet A 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 B C D E F G H I J K Consol Net Inc. NCI Control. R.E. Consol. Bal. Sht. Problem 3-10 (concluded) Year of consolidation 3 Cash Accounts receivable Inventory Land Investment in Sailair Trial Balance Pcraft Sailair 80,000 60,000 90,000 55,000 120,000 86,000 100,000 60,000 500,000 Buildings Accumulated depreciation - bldgs. Equipment Accumulated depreciation - equip. 800,000 (220,000) 150,000 (90,000) Bonds payable Common stock, $1 par - Sailair Paid-in capital in excess of par - Sailair Retained earnings - Sailair Common stock - Pcraft Paid-in capital in excess of par - Pcraft Retained earnings- Pcraft (60,000) - Eliminations Dr Cr 300,000 (80,000) 100,000 (72,000) (102,000) (100,000) (10,000) (90,000) (182,000) (100,000) (900,000) (315,000) Sales Cost of goods sold Depr. expense - building Depr. expense - equipment Other expenses Interest expense (800,000) 450,000 30,000 15,000 140,000 Dividend income Dividends declared - Sailair Dividends declared - Pcraft Totals Consolidated net income NCI share Controlling share NCI Controlling retained earnings Totals (350,000) 210,000 15,000 14,000 68,000 8,000 (10,000) 10,000 20,000 - - Eliminations and Adjustments: Page 6 L