Pcraft Corporation builds powerboats. On January 1, 20X1, Pcraft acquired Sailair Corporation, a company that manufactures sailboats. Pcraft paid cash in exchange for Sailair common stock. Sailair had the following balance sheet on January 1, 20X1:
|
Sailair Corporation |
|||
|
Assets |
Liabilities and Equity |
||
|
Accounts receivable |
$32,000 |
Current liabilities |
$90,000 |
|
Inventory |
40,000 |
Bonds payable |
100,000 |
|
Land |
60,000 |
Common stock |
10,000 |
|
Buildings |
250,000 |
Paid in capital in excess of par |
90,000 |
|
Accumulated depreciation |
50,000 |
Retained earnings |
112,000 |
|
Equipment |
100,000 |
||
|
Accumulated depreciation |
30,000 |
||
|
Total assets |
$402,000 |
Total liabilities and equity |
$402,000 |
An appraisal indicated that the following assets and liabilities had fair values that differed from their book values:
|
Inventory (sold during 20X1) |
$38,000 |
|
Land |
150,000 |
|
Buildings (20 year life) |
300,000 |
|
Equipment (5 year life) |
100,000 |
|
Bonds payable (5 year life) |
96,000 |
Any remaining excess is attributed to goodwill.
100%, equity method worksheet, several adjustments, third year. Refer to the preceding information for Pcraft’s acquisition of Sailair’s common stock. Assume that Pcraft paid $500,000 for 100% of Sailair common stock. Pcraft uses the simple equity method to account for its investment in Sailair. Pcraft and Sailair had the following trial balances on December 31, 20X3:
|
Pcraft |
Sailair |
|
|
Cash |
80,000 |
60,000 |
|
Accounts Receivable |
90,000 |
55,000 |
|
Inventory |
120,000 |
86,000 |
|
Land |
100,000 |
60,000 |
|
Investment in Sailair |
595,000 |
|
|
Buildings |
800,000 |
300,000 |
|
Accumulated Depreciation |
220,000 |
80,000 |
|
Equipment |
150,000 |
100,000 |
|
Accumulated Depreciation |
90,000 |
72,000 |
|
Current Liabilities |
60,000 |
102,000 |
|
Bonds Payable |
100,000 |
|
|
Common Stock |
100,000 |
10,000 |
|
Paid In Capital in Excess of Par |
900,000 |
90,000 |
|
Retained Earnings, Jan 1, 20X3 |
385,000 |
182,000 |
|
Sales |
800,000 |
350,000 |
|
Cost of Goods Sold |
450,000 |
210,000 |
|
Depreciation Expense—Buildings |
30,000 |
15,000 |
|
Depreciation Expense—Equipment |
15,000 |
14,000 |
|
Other Expenses |
140,000 |
68,000 |
|
Interest Expense |
8,000 |
|
|
Subsidiary Income |
35,000 |
|
|
Dividends Declared |
20,000 |
10,000 |
|
Totals |
0 |
0 |
Required
1. Prepare a zone analysis and a determination and distribution of excess schedule for the investment in Sailair.
2. Complete a consolidated worksheet for Pcraft Corporation and its subsidiary Sailair Corporation as of December 31, 20X3. Prepare supporting amortization and income distribution schedules.