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1. Papa Corporation acquired 100% ownership of Son Company on January 1, 20X8, for $128,000. At that date, the fair value of Sons buildings and equipment was $22,000 more than the book value. Buildings and equipment are depreciated on a 10-year basis; the balance of Sons accumulated depreciation was $50,000 on the date of acquisition. Papas management concluded on December 31, 20X8 that goodwill involved in its acquisition of Son shares had been impaired and the correct carrying value was $2,500.

Trial balance data for Papa and Son on December 31, 20X8 are as follows:

Item Son Company Debit Credit $30,000 23,000 25,000 15,000 150,000 Cash Accounts receivable Inventory Land Buildings & Equipment Investment in Son Company Cost of Goods Sold Wage Expense Depreciation Expense Interest Expense Other Expense Dividends Declared Accumulated Depreciation Accounts Payable Wages Payable Notes Payable Common Stock Retained Earnings Sales Income from Son Company Papa Corporation Debit Credit $19,000 70,500 90,000 30,000 350,000 130,300 125,000 42,000 25,000 12,000 13,500 30,000 $145,000 45,000 17,000 150,000 200,000 102,000 260,000 18,300 $937.300 $937,300 110,000 27,000 10,000 4,000 5,000 16,000 $60,000 16,000 9,000 50,000 60,000 40,000 180,000 $415.000 $415,000 a. Complete the consolidation worksheet below for 20X8, including the Book Value and Excess Value tables. b. Prepare the all required consolidation entries for 20X8. Book Value Analysis 1/1/X8 +/- Net Income +/- Dividends 12/31/X8 Excess Value Analysis 1/1/X8 Amortization 12/31/X8 Consolidation Entries Papa Corp. 20X8 Son Co. 20X8 DR CR Consolidated Income Statement Sales Less: COGS Less: Wage Expense Less: Depreciation Expense Less: Interest Expense Less: Other Expenses Less: Impairment Loss Income from Son Co. 260,000 (125,000) (42,000) (25,000) (12,000) (13,500) 180,000 (110,000) (27,000) (10,000) (4,000) (5,000) 18,300 Net Income 60,800 24,000 40,000 Statement of Retained Earnings Beginning Balance Net Income Less: Dividends Declared Ending Balance 102,000 60,800 (30,000) 132,800 24,000 (16,000) 48,000 Balance Sheet Cash Accounts Receivable Inventory Land 19,000 70,500 90,000 30,000 350,000 (145,000) 130,300 30,000 23,000 25,000 15,000 150,000 (60,000) Buildings & Equipment Less: Accumulated Depreciation Investment in Son Co. Goodwill Total Assets 544,800 183,000 45,000 16,000 17,000 Accounts Payable Wages Payable Notes Payable Common Stock Retained Earnings Total Liabilities & Equity 9,000 50,000 60,000 150,000 200,000 132,800 544,800 48,000 183,000

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