Question
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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