Answered: On January 1, 2023, Procise Corporation…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Concept explainers

Question

On January 1, 2023, Procise Corporation acquired 100 percent of the outstanding voting stock of GaugeRite Corporation for $1,993,850 cash. On the acquisition date, GaugeRite had the following balance sheet:

Cash	$ 65,000	Accounts payable	$ 126,000
Accounts receivable	108,000	Long-term debt	1,003,000
Land	772,000	Common stock	1,030,000
Equipment (net)	1,905,000	Retained earnings	691,000
Total assets	$ 2,850,000	Total liabilities and equity	$ 2,850,000

At the acquisition date, the following allocation was prepared:

Fair value of consideration transferred		$ 1,993,850
Book value acquired		1,721,000
Excess fair value over book value		272,850
To in-process research and development	$ 63,250
To equipment (8-year remaining life)	77,600	140,850
To goodwill (indefinite life)		$ 132,000

Although at acquisition date Procise had expected $63,250 in future benefits from GaugeRite’s in-process research and development project, by the end of 2023 it was apparent that the research project was a failure with no future economic benefits.

On December 31, 2024, Procise and GaugeRite submitted the following financial statements for consolidation. There were no intra-entity payables on that date.

Accounts	Procise	GaugeRite
Sales	$ (3,689,200)	$ (1,256,750)
Cost of goods sold	1,757,500	810,000
Depreciation expense	328,000	138,000
Other operating expenses	218,000	34,750
Subsidiary income	(264,300)	0
Net income	$ (1,650,000)	$ (274,000)
Retained earnings 1/1/24	$ (3,010,000)	$ (920,000)
Net income	(1,650,000)	(274,000)
Dividends declared	100,000	25,750
Retained earnings 12/31/24	$ (4,560,000)	$ (1,168,250)
Cash	$ 103,050	$ 10,750
Accounts receivable	846,000	222,000
Inventory	929,000	619,000
Investment in GaugeRite	2,388,450	0
Land	3,572,500	778,000
Equipment (net)	5,060,000	1,827,500
Goodwill	337,000	0
Total assets	$ 13,236,000	$ 3,457,250
Accounts payable	$ (261,000)	$ (421,000)
Long-term debt	(3,265,000)	(838,000)
Common stock	(5,150,000)	(1,030,000)
Retained earnings 12/31/24	(4,560,000)	(1,168,250)
Total liabilities and equity	$ (13,236,000)	$ (3,457,250)

Required:

Prepare a consolidated worksheet for Procise and GaugeRite as of December 31, 2024.

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 3 steps with 1 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions