Prepare a word-processed report that describes and discusses the following worksheet results: (200-300 words) + references if any. a. the effects of alternative investment accounting methods on the p

Prepare a word-processed report that describes and discusses the following worksheet results: (200-300 words) + references if any.

a. the effects of alternative investment accounting methods on the parent’s trial balances and the final consolidation figures.

b. The relation between consolidated retained earnings and the parent’s retained earnings under each of the three (equity, initial value, partial equity) investment accounting methods.

c. The effect on EPS, return on assets, return on equity, and debt-to-equity ratios of the recognition that all acquisition-related goodwill is considered inpaired in 2013.

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Chapter 3 – Computer Project
PECOS COMPANY AND SUARO COMPANY
Consolidated Information Worksheet
Pecos
Suaro
Revenues
-1,052,000
-427,000
Operating expenses
821,000
262,000
Amortization of intangibles
0
Goodwill impairment loss
0
Income of Suaro
0
Net income
-165,000
Retained earnings—Pecos, 1/1
Retained earnings—Suaro, 1/1
0
-201,000
Net income (above)
0
-165,000
Dividends paid
200,000
35,000
Retained earnings, 12/31
-331,000
Cash
195,000
95,000
Receivables
247,000
143,000
Inventory
415,000
197,000
Investment in Suaro
0
Land
341,000
85,000
Equipment (net)
240,100
100,000
Software
0
312,000
Other intangibles
145000
0
Goodwill
0
0
Total assets
932,000
Liabilities
-1,537,100
-251,000
Common stock
-500,000
-350,000
Retained earnings (above)
-331,000
Total liabilities and equity
-932,000
Fair Value Allocation Schedule
Acquisition-date fair value
1,450,000
Book value
476,000
Excess fair value over book value
974,000
Amortizations and Write-off
2011
2012
Land
-10,000
0
0
Brand Name
60,000
0
0
Software
100,000
50,000
50,000
IPR&D
300,000
300,000
0
Goodwill
524,000
0
0
Total
974,000
350,000
50,000
Suaro’s Retained Earnings Changes
2011
2012
Income
75,000
165,000
Dividends
0
35,000

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PECOS COMPANY AND SUARO COMPANY
Consolidated Worksheet
For the Year Ended December 31, 2012
EQUITY METHOD
Consolidation Entries
Consolidated
Pecos
Suaro
Debit
Credit
Totals
Revenues
-1,052,000
-427,000
-1,479,000
Operating expenses
821,000
262,000
1,083,000
Amortization of intangibles
0
(E)
50,000
50000
Goodwill impairment loss
0
0
Income of Suaro
-115,000
0
(I)
115,000
0
Net income
-346,000
-165,000
-346,000
Retained earnings—Pecos, 1/1
-655,000
0
-655,000
Retained earnings—Suaro, 1/1
0
-201,000
(S)
201,000
0
Net income (above)
-346,000
-165,000
-346,000
Dividends paid
200,000
35,000
(D)
35,000
200,000
Retained earnings, 12/31
-801,000
-331,000
-801,000
Cash
195,000
95,000
290,000
Receivables
247,000
143,000
390,000
Inventory
415,000
197,000
612,000
Investment in Suaro
1,255,000
0
(D)
35,000
(S)
551,000
0
(A)
624,000
(I)
115,000
Land
341,000
85,000
(A)
10,000
416,000
Equipment (net)
240,100
100,000
340,100
Software
0
312,000
(A)
50,000
(E)
50,000
312,000
Other intangibles
145,000
0
145,000
Brand name
0
0
(A)
60,000
60,000
Goodwill
0
0
(A)
524,000
524,000
Total assets
2,838,100
932,000
3,089,100
Liabilities
-1,537,100
-251,000
-1,788,100
Common stock
-500,000
-350,000
(S)
350,000
-500,000
Retained earnings (above)
-801,000
-331,000
-801,000
Total liabilities and equity
-2,838,100
-932,000
1,385,000
1,385,000
-3,089,100
Shaded items were provided on the Consolidated Information Worksheet
Consolidated Worksheet
(continued)

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