Pepper, Inc., purcashed 80% of the outstanding stock of the SaltCompany on January 01, 2015, for $2,750,000 cash.
At that date, Salt Company's assets and liabilities had thefollowing fair values and book values:
FMV BV cash and receivables 1400000 1400000 inventory 1792000 1600000 plant assets 5250000 5040000 curret liabilities (3500000) (3500000) long term debt (1800000) (1800000)
All of Salt Company's inventory was sold in the followingyear.
Salt Company depreciates plant assets over a 20-year life.
Pepper, Inc. amortizes debt premiums and discounts over its 6years to maturity using straight-line amortization.
Pepper, Inc. accounts for this investment using the equitymethod.
The financial statements for both companies for the year endedDecember 31, 2015, are shown below:
INCOME STATEMENT
For the Period Ending December 31 2015
(a)Pepper, Inc. (b)Salt Company
Revenue (a)$14,000,000 (b)$7,000,000
Income From Sub. (a)678,000 (b)0
Total Revenue (a)14678000 (b)7000000
Cost Of Sales (a)8,000,000 (b)4,250,000
Operating Expenses (a)2,500,000 (b)1,600,000
Interest Expense (a)250,000 (b)150,000
Total Expenses (a)10750000 (b)6000000
Net Income (a)3928000 (b)1000000
STATEMENT OF
RETAINED EARNINGS
-
Begining Balance (a)$4,000,000 (b)$2,540,000
add: net income (a)3928000 (b)1000000
Deduct: Dividends (a)600,000 (b)120,000
Ending Balance (a)7328000 (b)3420000
Balance Sheet As of December 31 2015 Pepper, Inc. Salt Company Assets Cash and Receivables $ 2,800,000 $ 1,200,000 Inventory 3,600,000 1,070,000 Plant Assets 5,500,000 4,800,000 (net) Accumulated Depreciation (2,500,000) Investment in Sub. 3,332,000 Total assets 12732000 7070000 Liabilities and Equities Current Liabilities $ 1,654,000 $ 1,400,000 Long-Term Debt 2,250,000 1,750,000 Capital Stock 1,500,000 500,000
RetainedEarnings 7328000 3420000
Total liab. andequity 12732000 7070000
(1)Using the above data and Excel, prepare a consolidatedworksheet for the period ending December 31, 2015. Be sure allinput data is in a separate part of the schedule so that thesolution will change with changes
(2)Include subschedules to calculate goodwill and the equitymethod subsidiary income for the period
(3)By linking to the work paper prepared in part 1, prepare aformal consolidated income statement, retained earnings statement,and balance sheet as of December 31, 2015
(a) is for pepper (b) is for salt
Please explain how you got your answers. Thank you!
Pepper, Inc., purcashed 80% of the outstanding stock of the SaltCompany on January 01, 2015, for $2,750,000 cash.
At that date, Salt Company's assets and liabilities had thefollowing fair values and book values:
| FMV | BV | |
| cash and receivables | 1400000 | 1400000 |
| inventory | 1792000 | 1600000 |
| plant assets | 5250000 | 5040000 |
| curret liabilities | (3500000) | (3500000) |
| long term debt | (1800000) | (1800000) |
All of Salt Company's inventory was sold in the followingyear.
Salt Company depreciates plant assets over a 20-year life.
Pepper, Inc. amortizes debt premiums and discounts over its 6years to maturity using straight-line amortization.
Pepper, Inc. accounts for this investment using the equitymethod.
The financial statements for both companies for the year endedDecember 31, 2015, are shown below:
INCOME STATEMENT
For the Period Ending December 31 2015
(a)Pepper, Inc. (b)Salt Company
Revenue (a)$14,000,000 (b)$7,000,000
Income From Sub. (a)678,000 (b)0
Total Revenue (a)14678000 (b)7000000
Cost Of Sales (a)8,000,000 (b)4,250,000
Operating Expenses (a)2,500,000 (b)1,600,000
Interest Expense (a)250,000 (b)150,000
Total Expenses (a)10750000 (b)6000000
Net Income (a)3928000 (b)1000000
STATEMENT OF
RETAINED EARNINGS
-
Begining Balance (a)$4,000,000 (b)$2,540,000
add: net income (a)3928000 (b)1000000
Deduct: Dividends (a)600,000 (b)120,000
Ending Balance (a)7328000 (b)3420000
| Balance Sheet | |||||
| As of December 31 2015 | |||||
| Pepper, Inc. | Salt Company | ||||
| Assets | |||||
| Cash and Receivables | $ 2,800,000 | $ 1,200,000 | |||
| Inventory | 3,600,000 | 1,070,000 | |||
| Plant Assets | 5,500,000 | 4,800,000 | (net) | ||
| Accumulated Depreciation | (2,500,000) | ||||
| Investment in Sub. | 3,332,000 | ||||
| Total assets | 12732000 | 7070000 | |||
| Liabilities and Equities | |||||
| Current Liabilities | $ 1,654,000 | $ 1,400,000 | |||
| Long-Term Debt | 2,250,000 | 1,750,000 | |||
| Capital Stock | 1,500,000 | 500,000 | |||
RetainedEarnings 7328000 3420000
Total liab. andequity 12732000 7070000
(1)Using the above data and Excel, prepare a consolidatedworksheet for the period ending December 31, 2015. Be sure allinput data is in a separate part of the schedule so that thesolution will change with changes
(2)Include subschedules to calculate goodwill and the equitymethod subsidiary income for the period
(3)By linking to the work paper prepared in part 1, prepare aformal consolidated income statement, retained earnings statement,and balance sheet as of December 31, 2015
(a) is for pepper (b) is for salt
Please explain how you got your answers. Thank you!
Related questions
Pepper, Inc., purcashed 80% of the outstanding stock of the SaltCompany on January 01, 2015, for $2,750,000 cash.
At that date, Salt Company's assets and liabilities had thefollowing fair values and book values:
| FMV | BV | |
| cash and receivables | 1400000 | 1400000 |
| inventory | 1792000 | 1600000 |
| plant assets | 5250000 | 5040000 |
| curret liabilities | (3500000) | (3500000) |
| long term debt | (1800000) | (1800000) |
All of Salt Company's inventory was sold in the followingyear.
Salt Company depreciates plant assets over a 20-year life.
Pepper, Inc. amortizes debt premiums and discounts over its 6years to maturity using straight-line amortization.
Pepper, Inc. accounts for this investment using the equitymethod.
The financial statements for both companies for the year endedDecember 31, 2015, are shown below:
INCOME STATEMENT
For the Period Ending December 31 2015
(a)Pepper, Inc. (b)Salt Company
Revenue (a)$14,000,000 (b)$7,000,000
Income From Sub. (a)678,000 (b)0
Total Revenue (a)14678000 (b)7000000
Cost Of Sales (a)8,000,000 (b)4,250,000
Operating Expenses (a)2,500,000 (b)1,600,000
Interest Expense (a)250,000 (b)150,000
Total Expenses (a)10750000 (b)6000000
Net Income (a)3928000 (b)1000000
STATEMENT OF
RETAINED EARNINGS
-
Begining Balance (a)$4,000,000 (b)$2,540,000
add: net income (a)3928000 (b)1000000
Deduct: Dividends (a)600,000 (b)120,000
Ending Balance (a)7328000 (b)3420000
| Balance Sheet | |||||
| As of December 31 2015 | |||||
| Pepper, Inc. | Salt Company | ||||
| Assets | |||||
| Cash and Receivables | $ 2,800,000 | $ 1,200,000 | |||
| Inventory | 3,600,000 | 1,070,000 | |||
| Plant Assets | 5,500,000 | 4,800,000 | (net) | ||
| Accumulated Depreciation | (2,500,000) | ||||
| Investment in Sub. | 3,332,000 | ||||
| Total assets | 12732000 | 7070000 | |||
| Liabilities and Equities | |||||
| Current Liabilities | $ 1,654,000 | $ 1,400,000 | |||
| Long-Term Debt | 2,250,000 | 1,750,000 | |||
| Capital Stock | 1,500,000 | 500,000 | |||
RetainedEarnings 7328000 3420000
Total liab. andequity 12732000 7070000
(1)Using the above data and Excel, prepare a consolidatedworksheet for the period ending December 31, 2015. Be sure allinput data is in a separate part of the schedule so that thesolution will change with changes
(2)Include subschedules to calculate goodwill and the equitymethod subsidiary income for the period
(3)By linking to the work paper prepared in part 1, prepare aformal consolidated income statement, retained earnings statement,and balance sheet as of December 31, 2015
(a) is for pepper (b) is for salt
Please explain how you got your answers. Thank you!
