Question #5 please! **Acquisition Overview**On January 2, 2018, Company P acquired all the outstanding voting stock of Company S in exchange for $6,000 in stock. Following this acquisition, Company S became a wholly owned subsidiary of Company P, maintaining an independent accounting system. Both companies observe December 31 as their fiscal year-end. At the time of acquisition, Company S's stockholder's equity was valued at $2,500, which included $1,700 in Retained Earnings.**Purpose of Acquisition**Company P aimed to leverage Company S's technology and computer software through this acquisition. The fair values of these assets differed from the values recorded on Company S's books.**Asset Valuation at Acquisition**The table below details the book and fair values of the key assets acquired:| Asset | Book Value | Fair Value | Remaining Life ||-----------------------|------------|------------|----------------|| Patented technology | $140 | $2,240 | 7 years || Computer software | $60 | $1,260 | 12 years |By December 31, 2020, Company S owed Company P $20.**Asset and Liability Valuation**The remaining identifiable assets and liabilities of Company S at the acquisition date had book values closely approximating their fair values. Since the acquisition, no assets have suffered impairment. **Financial Performance (2018-2020)**Over the following three years, Company S reported various income and dividends. Title: Financial Analysis and Consolidation Steps### Income and Dividend Summary| | Net Income | Dividends ||--------|------------|-----------|| **2018** | $900 | $150 || **2019** | $940 | $150 || **2020** | $975 | $150 |### Required Steps1. **Prepare the Analysis:** - Analyze as of the acquisition date, including unamortized differentials from 1/1/18 through 2020.2. **Calculate the Balance:** - Compute the balance in the account "Investment in Sub" as of 12/31/20. Ensure all computations are shown.3. **Prepare Journal Entries:** - Document the journal entries for Company P regarding its investment in Company S for the year ending 12/31/20.4. **Consolidated Net Income:** - Calculate the consolidated net income for the year 2020 separately.5. **Elimination Entries:** - Prepare all necessary elimination entries for the year ended 2020.6. **Complete Consolidated Workpapers:** - Finalize the consolidated workpapers for the year ending 12/31/20.This guide outlines the financial analysis process, focusing on acquisition, calculations, and consolidation for educational purposes.

SOLUTION:- 4.) Acquisition differential amortisation and impairment schedule…

1. 2. 3. 4. 5. 5. Prepare the analysis as of acquisition date including unamortized differential at 1/1/18 and through 2020. Calculate the balance in the account Investment in Sub as of 12/31/20. Show all computations. Prepare the journal entries Company P recorded with respect to its investment in Company S for the year ended 12/31/20. Separately calculate consolidated net income for 2020 Prepare all necessary elimination entries for the year ended 2020. Complete the consolidated workpapers for the year ended 12/31/20.

1. 2. 3. 4. 5. 5. Prepare the analysis as of acquisition date including unamortized differential at 1/1/18 and through 2020. Calculate the balance in the account Investment in Sub as of 12/31/20. Show all computations. Prepare the journal entries Company P recorded with respect to its investment in Company S for the year ended 12/31/20. Separately calculate consolidated net income for 2020 Prepare all necessary elimination entries for the year ended 2020. Complete the consolidated workpapers for the year ended 12/31/20.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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