Chapter 3 – Computer Project
PECOS COMPANY AND SUARO COMPANY
Consolidated Information Worksheet
Pecos Suaro
Revenues (1,052,000) (427,000)
Retained earnings—Pecos, 1/1
Retained earnings—Suaro, 1/1 0 (201,000)
Net income (above) 0 (165,000)
Dividends declared 200,000 35,000
Retained earnings, 12/31 (331,000)
Equipment (net) 240,100 100,000
Software 0 312,000
Other intangibles 145,000 0
Goodwill 0 0
Total assets 932,000
Consolidated Information Worksheet (continued)
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
Goodwill 524,000 0 0
Total 974,000 350,000 50,000
Suaro’s Retained Earnings Changes
2014 2015
Income 75,000 165,000
Chapter 3 – Computer Project Solution
PECOS COMPANY AND SUARO COMPANY
Consolidated Worksheet
For the Year Ended December 31, 2015
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
Retained earnings—Suaro, 1/1 0 (201,000) (S) 201,000 0
Net income (above) (346,000) (165,000) (346,000)
Dividends declared 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
Consolidated Worksheet (continued)
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
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
Chapter 3 – Computer Project Solution
PECOS COMPANY AND SUARO COMPANY
Consolidated Worksheet
For the Year Ended December 31, 2015
PARTIAL 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 0 (E) 50,000 50,000
Goodwill impairment loss 0 0 0
Income of Suaro (165,000) 0 (I) 165,000 0
Retained earnings, 12/31 (1,201,000) (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 1,655,000 0 (D) 35,000 (S) 551,000 0
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
Shaded items were provided on the Consolidated Information Worksheet
Chapter 3 – Computer Project Solution
PECOS COMPANY AND SUARO COMPANY
Consolidated Worksheet
For the Year Ended December 31, 2015
INITIAL VALUE METHOD
Consolidation Entries Consolidated
Pecos Suaro Debit Credit Totals
Revenues (1,052,000) (427,000) (1,479,000)
Net income (266,000) (165,000) (346,000)
Retained earnings—Pecos, 1/1 (930,000) 0 (*C) 275,000 (655,000)
Retained earnings—Suaro, 1/1 0 (201,000) (S) 201,000 0
Cash 195,000 95,000 290,000
Receivables 247,000 143,000 390,000
Consolidated Worksheet (continued)
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
Retained earnings (above) (996,000) (331,000) (801,000)
Total liabilities and equity (3,033,100) (932,000) 1,545,000 1,545,000 (3,089,100)
Shaded items were provided on the Consolidated Information Worksheet
Chapter 3 – Computer Project
PECOS COMPANY AND SUARO COMPANY
Goodwill Impairment Loss Effects
Without With
Impairment Impairment
Common shares outstanding 500,000 500,000
Consolidated net income/(loss) 346,000 (178,000)
Earnings-per-share 0.69 -0.36
Return on assets 11.47% -6.46%
Return on equity 28.18% -18.43%
Debt-to-equity 1.37 2.30
Chapter 3 – Computer Project Solution
PECOS COMPANY AND SUARO COMPANY
Consolidated Worksheet
For the Year Ended December 31, 2015
EQUITY METHOD – GOODWILL IMPAIRMENT LOSS
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 0 (E) 50,000 50,000
Goodwill impairment loss 524,000 0 524,000
Dividends declared 200,000 35,000 (D) 35,000 200,000
Retained earnings, 12/31 (277,000) (331,000) (277,000)
Cash 195,000 95,000 290,000
Receivables 247,000 143,000 390,000
(I) 115,000
Consolidated Worksheet (continued)
Land 341,000 85,000 (A) 10,000 416,000
Equipment (net) 240,100 100,000 340,100
Goodwill 0 0 0
Total assets 2,314,100 932,000 2,565,100
Shaded items were provided on the Consolidated Information Worksheet