The individual financial statements for Peter Company and SmithCo. for the year ended December 31, 2017, are attached in the Excelspreadsheet. Peter acquired a 91 percent interest in Smith onJanuary 1, 2016, in exchange for various considerations totaling$1,078,350. At the acquisition date, the fair value of thenon-controlling interest was $106,650 and Smith’s book value was$677,000. Smith had developed internally a customer list that wasnot recorded on its books but had an acquisition-date fair value of$335,000. This customer list is being amortized over 10 years.

Peter sold Smith a building with a $113,000 book value (cost of$275,000) for $135,000, with a remaining life of 10 years onJanuary 2, 2016. In addition, on January 2, 2017, Peter reports$1,000,000 in bonds outstanding with a book value of $925,000, witha 4.0% coupon rate. Smith purchased 50 percent of these bonds onthe open market at a price of $410,000 on that date. The Bonds comedue December 31, 2019.

Smith transfers inventory to Peter on a regular basis. In 2016,Smith shipped inventory costing $171,000 to Peter at a price of$225,000. During 2017, Smith shipped goods totaling $267,000, whichcost Smith $197,580. In year-ended 2016, 35% of the goods, and inyear-ended 2017 40% of the goods, had not been resold to thirdparties by the end of the year. In addition, at the end of 2017,Peter owes Smith $32,000 due to these shipments.

1) Prepare the “schedule” that allocates the purchase price anddetermines the amount of Goodwill, if any.

2) Prepare all the consolidation worksheet adjustment entriesfor 2017, including any supporting schedules as necessary. asfollows:

• S, A, I, D, E entries

• P, G, *G, TI entries

• *TA, ED entries

• Bonds entry

• *C entry ?

• Supporting schedules should include:

i. the calculation of the non-controlling interest in the incomeof Smith

ii. the non-controlling interest in the assets of Smith

iii. schedule supporting the Bond calculations for entry B

iv. schedule supporting the gross profit in inventoryelimination

v. and the support for the *C entry

3) Prepare a consolidation worksheet that includes the properposting of the worksheet entries.

4) Additional information: • Income in 2016 reported by Smithwas $262,000; • Dividends paid in 2016 by Smith was $42,000.

Note: Your final submission will be the Excel worksheet whichwill contain all the data / support necessary to reach a finalconsolidation worksheet. Many of the points are associated with thecorrect calculation (and display of the calculations) for therequired journal entries.