1. 2. 3. 4. 5. 6. 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. 6. 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.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Question #2 please!
Transcribed Image Text:### Financial Data and Instructions for Analysis
The table below provides financial data for the years 2018 to 2020:
| Year | Net Income | Dividends |
|------|------------|-----------|
| 2018 | $900 | $150 |
| 2019 | $940 | $150 |
| 2020 | $975 | $150 |
### Required Steps for Analysis
1. **Prepare the Analysis**
- Conduct an analysis as of the acquisition date, including the unamortized differential from January 1, 2018, through 2020.
2. **Calculate Investment Balance**
- Determine the balance in the Investment in Subsidiary account as of December 31, 2020. Ensure all computations are shown.
3. **Journal Entries Preparation**
- Prepare the necessary journal entries for Company P regarding its investment in Company S for the year ended December 31, 2020.
4. **Net Income Calculation**
- Independently calculate the consolidated net income for the year 2020.
5. **Elimination Entries**
- Prepare all required elimination entries for the year ended 2020.
6. **Consolidated Workpapers Completion**
- Complete the consolidated workpapers for the year ended December 31, 2020.
This structured approach is designed to guide you through a comprehensive financial analysis and reporting process, crucial for accurate financial consolidation and decision-making.
![**Acquisition Overview and Asset Valuation**
On January 2, 2018, Company P acquired all outstanding voting stock of Company S by exchanging $6,000 worth of stock. This acquisition established Company S as a wholly owned subsidiary, operating under an independent accounting system. Both companies conclude their fiscal year on December 31. At the time of acquisition, Company S reported stockholder’s equity of $2,500, which included Retained Earnings of $1,700.
**Strategic Objectives of Acquisition**
Company P aimed to leverage Company S's technology and computer software assets, which had differing book and fair values as of the acquisition date. Below is a detailed breakdown of these assets:
| **Asset** | **Book Value** | **Fair Value** | **Remaining Life** |
|------------------------|--------------|--------------|-------------------|
| Patented Technology | $140 | $2,240 | 7 years |
| Computer Software | $60 | $1,260 | 12 years |
**Financial Obligations and Subsequent Performance**
As of December 31, 2020, Company S owed Company P $20.
Company S's remaining identifiable assets and liabilities were noted to have acquisition-date book values closely approximating their fair values. Since the acquisition, no impairment of assets has been recorded. Over the following three years, Company S's financial performance reflected the following income and dividends:
- **Yearly Income:**
- Year 1: [Data Needed]
- Year 2: [Data Needed]
- Year 3: [Data Needed]
- **Dividends Distributed:**
- Year 1: [Data Needed]
- Year 2: [Data Needed]
- Year 3: [Data Needed]
This strategic acquisition and asset appraisal highlight Company P's intent to strengthen its technological capabilities through Company S's advanced assets and sustained financial contribution.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F3f87d1d8-f4a6-4679-a885-49fa5c1ec7b8%2Fa520db3f-d3ce-4331-b096-ea3a46686683%2Fk4oxyfo_processed.png&w=3840&q=75)
Transcribed Image Text:**Acquisition Overview and Asset Valuation**
On January 2, 2018, Company P acquired all outstanding voting stock of Company S by exchanging $6,000 worth of stock. This acquisition established Company S as a wholly owned subsidiary, operating under an independent accounting system. Both companies conclude their fiscal year on December 31. At the time of acquisition, Company S reported stockholder’s equity of $2,500, which included Retained Earnings of $1,700.
**Strategic Objectives of Acquisition**
Company P aimed to leverage Company S's technology and computer software assets, which had differing book and fair values as of the acquisition date. Below is a detailed breakdown of these assets:
| **Asset** | **Book Value** | **Fair Value** | **Remaining Life** |
|------------------------|--------------|--------------|-------------------|
| Patented Technology | $140 | $2,240 | 7 years |
| Computer Software | $60 | $1,260 | 12 years |
**Financial Obligations and Subsequent Performance**
As of December 31, 2020, Company S owed Company P $20.
Company S's remaining identifiable assets and liabilities were noted to have acquisition-date book values closely approximating their fair values. Since the acquisition, no impairment of assets has been recorded. Over the following three years, Company S's financial performance reflected the following income and dividends:
- **Yearly Income:**
- Year 1: [Data Needed]
- Year 2: [Data Needed]
- Year 3: [Data Needed]
- **Dividends Distributed:**
- Year 1: [Data Needed]
- Year 2: [Data Needed]
- Year 3: [Data Needed]
This strategic acquisition and asset appraisal highlight Company P's intent to strengthen its technological capabilities through Company S's advanced assets and sustained financial contribution.
Expert Solution
Step 1
SOLUTION:-
a.)
|
Acquisition Analysis: |
Amt (in $) |
|
Book Value |
2500 |
|
Purchase price |
6000 |
|
Goodwill |
3500 |
|
Fair Value |
|
|
Book Value |
2500 |
|
Plus excess of book value |
3300 |
|
Net asset fair value |
5800 |
|
Purchase price |
6000 |
|
Goodwill at FV |
200 |
b.)
|
Excess amortisation/depreciation |
|
|
Patented technology |
=excess of fairvalue over book value/useful life |
|
|
= 2100/7 |
|
|
= 300 |
|
Computer software |
= 1200/12 |
|
|
= 100 |
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