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Problem 3-2 (LO 2) Simple equity method adjustments, consoli

    Problem 3-2 (LO 2) Simple equity method adjustments, consolidated worksheet.On January 1, 2015, Paro Company purchases 80% of the common stock of Solar Company for $320,000. Solar has common stock, other paid-in capital in excess of par, and retained earnings of$50,000, $100,000, and $150,000, respectively. Net income and dividends for two years for Solar are as follows:20152016Net income $60,000 $90,000Dividends 20,000 30,000On January 1, 2015, the only undervalued tangible assets of Solar are inventory and the building. Inventory, for which FIFO is used, is worth $10,000 more than cost. The inventory is sold in 2015. The building, which is worth $30,000 more than book value, has a remaining life of10 years, and straight-line depreciation is used. The remaining excess of cost over book value is attributed to goodwill.Required1. Using this information and the information in the following trial balances on December 31, 2016, prepare a value analysis and a determination and distribution of excess schedule:Paro CompanySolar CompanyInventory, December 31100,000 50,000Other Current Assets136,000180,000Investment in Solar Company400,000Land 50,000 50,000Buildingsand Equipment350,000320,000Accumulated Depreciation(100,000) (60,000)GoodwillOther Intangibles 20,000Current Liabilities(120,000) (40,000)Bonds Payable(100,000)Other Long-Term Liabilities(200,000)Common Stock—Paro Company(200,000)Other Paid-In Capital in Excess of Par—Paro Company(100,000)Retained Earnings—Paro Company(214,000)Common Stock—Solar Company (50,000)Other Paid-In Capital in Excess of Par—Solar Company(100,000)Retained Earnings—Solar Company(190,000)Net Sales(520,000)(450,000)Cost of Goods Sold300,000260,000Operating Expenses120,000100,000Subsidiary Income (72,000)Dividends Declared—Paro Company 50,000Dividends Declared—Solar Company 30,000 Totals 0 02. Complete a worksheet for consolidated financial statements for 2016. Include columns for eliminations and adjustments, consolidated income, NCI, controlling retained earnings, and consolidated balance sheet.Problem 3-10 (LO3, 5) 100%, cost method worksheet, several adjustments, third year.Refer to the preceding information for Paulcraft’s acquisition of Switzer’s common stock. Assume that Paulcraft pays $480,000 for 100% of Switzer common stock. Paulcraft uses the cost method to account for its investment in Switzer. Paulcraft and Switzer have the following trial balances on December 31, 2017 as shown on page 191.Paulcraft Switzer Cash100,000 110,000 Accounts Receivable90,000 55,000 Inventory120,000 86,000 Land100,000 60,000 Investment in Switzer480,000 Buildings800,000 250,000 Accumulated Depreciation(220,000)(80,000)Equipment150,000 100,000 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, January 1, 2017(315,000)(182,000)Sales(800,000)(350,000)Cost of Goods Sold450,000 210,000 Depreciation Expense—Buildings30,000 15,000 Depreciation Expense—Equipment15,000 14,000 Other Expenses140,000 68,000 Interest Expense8,000 Dividend Income(10,000)Dividends Declared 20,000 10,000 Totals 0 0Required1. Prepare a value analysis and a determination and distribution of excess schedule for the investment in Switzer.2. Complete a consolidated worksheet for Paulcraft Corporation and its subsidiary Switzer Corporation as of December 31, 2017. Prepare supporting amortization and income distribution schedules.Complete Problem 3-2 and Problem 3-10 using the template attached.

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