On January 1,2012, Picante Corporation acquired 100 percent of the outstanding votidg stock of Salsa Corporation for $1,765,000 cash. On the acquisition date, Salsa had the following balance sheet:
Cash | $ 14,000 | Accounts payable | $120,000 |
Account Receivable | 100,000 | Long-term debt | 930,000 |
Land | 700,000 | Common stock | 1,000,000 |
Wquipment | 1,886,000 | Retained earnings | 650,000 |
| $2,700,000 |
| $2,700,000 |
At the acquisition date, the following allocation was prepared:
Fair value of consideration transferred |
| $1,765,000 |
Book value acquired |
| 1,650,000 |
Excess fair value over book value |
| 115,000 |
To in-process research and development | $44,000 |
|
To equipment (8-year remaining life). | 26,000 | ..100,000 |
To goodwill (indefinite life) |
| $15,000 |
Although at acquisition date Picante had expected $44,000 in future benefits from Salsa’s in-process research and development project, by the end of 2012, it was apparent that the research project was a failure with no future economic benefits.
On December 31, 2013, Picante and Salsa submitted the following trial balances for consolidation:
| Picante | Salsa |
Sales | $(3,500,000) | $(1,000,000) |
Cost of goods sold | 1,600,000 | 630,000 |
Depreciation expense. | 540,000 | 160,000 |
Subsidiary income . | (203,000) | -0- |
Net income | $(1,563,000) | $(210,000) |
Retained earnings 1/1/13 | $(3,000,000) | $(800,000) |
Net Income | 1,563,000 | 210,000 |
Dividends paid | 200,000 | 25,000 |
Retained earnings 12/31/13 | $(4,363,000) | $(985,000) |
Cash | $228,000 | $50,000 |
Accounts receivable | 840,000 | 155,000 |
Inventory | 900,000 | 580,000 |
Investment in Salsa | 2,042,000 | -0- |
Land | 3,500,000 | 700,000 |
Equipment (net) | 5,000,000 | 1,700,000 |
Goodwil | 290,000 | -0- |
Total assets | $12,800,000 | $3,185,000 |
Accounts payable | $(193,000) | $(400,000) |
Long-term debt | (3,094,000) | (800,000) |
Common stock | (5,150,000) | (1,000,000) |
Retained earnings 12/31/13 | (4,363,000) | (985,000) |
Total liabilities and equities | $(12,800,000) | $(3,185,000) |
a. Show how Picante derived its December 31, 2013, Investment in Salsa account balance.
b. Prepare a consolidated worksheet for Picante and Salsa as of December 31,2013.
We need at least 10 more requests to produce the solution.
0 / 10 have requested this problem solution
The more requests, the faster the answer.