Chapter 5 Allocation and Depreciation of Differences between Implied and Book Values Homework Exercise 5-3 On January 1, 2020, Palmero Company purchased an 80% interest in Santos Company for $2,800,000. On this date, Santos Company had common stock of $500,000 and retained earnings of $1,000,000. On the date of acquisition, the fair value of the assets and liabilities of Santos were equal to their book value except for property and equipment(net), which had a fair value of $1,500,000, and a book value of $600,000. The property and equipment had an estimated remaining life of 10 years. Palmero reported net income from independent operations of $400,000 in 2014 and $425,000 in 2021. Santos reported net income of $300,000 in 2020 and $400,000 in 2021. Neither company declared dividends in 2020 and 2021. Palmero uses the cost method to account for its investment in Santos Required: a. Prepare in general journal form the entries necessary in consolidated statements workpapers for the years ended December 31, 2020 and 2021. b. Prepare a schedule or T account showing the calculation of the controlling and noncontrolling interest in the consolidated net income for the years ended December 31, 2020 and December 31, 2021. Parent NCI Entire Value Purchase price and Implied value Less Book Value of Equity Acquired: Capital Stock/Retained Earnings Chapter 5 Allocation and Depreciation of Differences between Implied and Book Values Homework Exercise 5-3 On January 1, 2020, Palmero Company purchased an 80% interest in Santos Company for $2,800,000. On this date, Santos Company had common stock of $500,000 and retained earnings of $1,000,000. On the date of acquisition, the fair value of the assets and liabilities of Santos were equal to their book value except for property and equipment(net), which had a fair value of $1,500,000, and a book value of $600,000. The property and equipment had an estimated remaining life of 10 years. Palmero reported net income from independent operations of $400,000 in 2014 and $425,000 in 2021. Santos reported net income of $300,000 in 2020 and $400,000 in 2021. Neither company declared dividends in 2020 and 2021. Palmero uses the cost method to account for its investment in Santos Required: a. Prepare in general journal form the entries necessary in consolidated statements workpapers for the years ended December 31, 2020 and 2021. b. Prepare a schedule or T account showing the calculation of the controlling and noncontrolling interest in the consolidated net income for the years ended December 31, 2020 and December 31, 2021. Parent NCI Entire Value Purchase price and Implied value Less Book Value of Equity Acquired: Capital Stock/Retained Earnings