On January 1, 2014, Picante Corporation acquired 100 percent of the outstanding voting stock of Salsa Corporation for $1,765,000 cash. On the acquisition date, Salsa had the following balance sheet:

At the acquisition date, the following allocation was prepared:

Although at acquisition date Picante had expected $44,000 in future benefits from Salsa’s in-process research and development project, by the end of 2014, it was apparent that the research project was a failure with no future economic benefits.
On December 31, 2015, Picante and Salsa submitted the following trial balances for consolidation. There were no intra-entity payables on that date.

a. Show how Picante derived its December 31, 2015, Investment in Salsa account balance.
b. Explain the treatment of the acquired in-process research and development.
c. Prepare a consolidated worksheet for Picante and Salsa as of December 31, 2015.

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Cash Accounts receivable Land Equipment (net) 14,000 Accounts payable 100,000 Long-term debt 700,000 Common stock 1,886,000 Retained earnings $ 120,000 930,000 1,000,000 650,000 $2,700,000 $2,700,000 Fair value of consideration transferred- . Book value acquired.-- . Excess fair value over book value $1,765,000 1,650,000 115,000 To in-process research and development To equipment (8-year remaining life) To goodwill (indefinite life) $44,000 56,000 100,000 $ 15,000 Picante Salsa Sales Cost of goods sold. ···· Depreciation expense.. Subsidiary income (3,500,000) 1,000,000) 630,000 160,000 1,600,000 540,000 (203.000) Net income Retained earnings 1/1/15 Net income Dividends declared - . .. .(1,563,000) (210,000) . ..(3,000,000) (800,000) (210,000) 25,000 S (4,363,000) (985,000) 228,000 50,000 155,000 580,000 (1,563,000) 200,000 Retained earnings 12/31/15 Cash . Accounts receivable Inventory Investment in Salsa Land Equipment (net)- Goodwill. 840,000 900,000 2,042,000 3,500,000 5,000,000 290,000 S 12,800,000 700,000 1,700,000 Total assets $ 3,185,000 Accounts payable Long-term debt Common stock Retained earnings 12/31/15 193,000) (400,000) (800,000) 5,150,000 (1,000,000) (4,363,000) (85,000) Total liabilities and equities..(12,800,000) 3,185,000) (3,094,000)