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The individual financial statements for Peter Company and Smith Co. for the year ended December 31, 2016, are shown below. Peter acquired a 100 percent

The individual financial statements for Peter Company and Smith Co. for the year ended December 31, 2016, are shown below. Peter acquired a 100 percent interest in Smith on January 1, 2015, in exchange for various considerations totaling $1,600,000. At the acquisition date Smiths book value was $1,225,000. Smith had developed internally a customer list that was not recorded on its books but had an acquisition-date fair value of $250,000. This customer list is being amortized over 15 years.

Reported income and dividends for Smith for 2015 were $276,000 of income with $82,000 paid in dividends. Income and dividends for Smith for 2016 were $196,000 of income with $45,000 paid in dividends.

Accounts Peter Smith
Sales

(1,252,000)

(786,000)
Cogs 784,000 465,000
Expenses 165,000 125,000
Equity in Smith Income (196,000) -
Separate company net income (499,000) (196,000)
Retained Earnings 1/1 (1,619,000)
Rerained Earnings 1/1 (819,000)
Net Income (499,000) (196,000)
Dividends paid 120,000 45,000
Retained Earnings 12/31 (1,998,000) (970,000)
Cash 187,500 137,500
Receivables 375,000 196,500
Inventory 490,000 431,700
Investment in Smith 1,945,000 -
Land 385,000 587,500
Buildings, and equip, net 496,000 325,000
Goodwill
Customer list
Total Assets 3,878,500 1,678,200
Current Liabilities (467,500) (108,200)
Bonds payable (500,000)
Discount on bonds 12,000
Common Stock (825,000) (400,000)
Additional Paid-in Capital (100,000) (200,000)
Retained Earnings 12/31 (1,998,000) (970,000)
Total Liabilities and SE (3,878,500) (1,678,200)

1.Prepare the schedule that allocates the purchase price and determines the amount of Goodwill, if any, making sure to label items correctly. (4 points)

2.Prepare all the consolidation worksheet adjustment entries for 2016, making sure to link them correctly to supporting data (11 pts for entries)

3.Prepare a consolidation worksheet that includes beginning amounts, the posting of the entries on the worksheet, and final balances. (8 pts for correct worksheet)

4.In addition, your final solution will include the supporting schedule for the determination of the *C worksheet entry. (2 pts)

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