On January 1, 2011, Praxis Corp. purchased 75.00% of the net assets of Sanchez Corp. for $178,945. The fair value of Sanchez Corp. on January 1, 2011, is estimated to be $238,594. The write-up of the Buildings and Equipment from book value to fair market value amounted to 55.00% of the total differential. The write-up of the Land from book value to fair market value amounted to 10.00% of the total differential. The remaining 35.00% of the total differential is attributable to Goodwill The remaining useful life of the Buildings and Equipment is assumed to be 10 years Goodwill is impaired at the end of 2011 and 2012 and must be written down, each year. by 15.00 % of its original (initial) value. The company uses the equity method approach to account for the goodwill impairment A complete set of financial statements for fiscal years 2011 and 2012 for Praxis Corp is located Below. A complete set of financial statements for fiscal years 2011 and 2012 for Sanchez Corp. is located below

1) Based on the purchase price, calculate the purchased differential (in dollars), as well as the purchased differential (in dollars), applied to

i) Buildings and Equipment,

ii) Land and

iii) Goodwill.

2) Based on the fair value, calculate the total differential (in dollars), as well as the total differential (in dollars), applied to

i) Buildings and Equipment,

ii) Land, and

iii) Goodwill.

3) For the fiscal year 2011. Provide ALL journal entries (and t-accounts) used by the parent company to account for its investment in the subsidiary using the equity method.

4) For the fiscal year 2011 provide ALL eliminating entries (and t-accounts) necessary to create consolidated financial statements.

5) For the fiscal year 2011, create the consolidated financial statements using the 3-step worksheet

6) For the fiscal year 2012, provide ALL journal entries (and t-accounts) used by the parent company to account for its investment in the subsidiary using the equity method.

7) For the fiscal year 2012 provide ALL eliminating entries (and t-accounts) necessary to create consolidated financial statements.

8) For the fiscal year 2012, create the consolidated financial statements using the 3-step worksheet. Attached Financials

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Praxis Sanchez INCOME STATEMENT Sanchez Sanchez Praxis Praxis 12/31/11 12/31/12 12/31/11 12/31/12 INCOME STATEMENT Sales 890,750 979,825 Sales 509,000 534,450 CGS 636,250 699,875 Income from Subsidiary Deprec and Amort 31,813 31,813 Total Sales 509,000 534,450 Other Expenses 95,438 104,981 CGS 318,125 331,359 Company Net Income 127,250 143,156 Deprec and Amort 19,088 19,088 Income from Subsidiary (Sanchez) 53,415 58,998 Other Expenses 95,438 100,209 Net Income 180,665 202,155 Net Income 76,350 83,794 STATEMENT OF RETAINED EARNINGS STATEMENT OF RETAINED EARNINGS Retained Earnings (BOY) 127,250 178,150 Retained Earnings 1/1/X7 290,000 407,040 Net Income (from Above) 76,350 83,794 Net Income (from Above) 180,665 202,155 Dividends Declared 25,450 33,518 Dividends Declared 63,625 101,077 Retained Earnings (EOY) 178,150 228,426 Retained Earnings 12/31/X7 407,040 508,117 BALANCE SHEET BALANCE SHEET Cash 31,813 60,138 Cash 400,117 476,878 AR 69,988 80,168 AR 89,075 97,983 Inventory 127,250 160,335 Inventory 222,688 244,956 Land 25,450 25,450 Land 101,800 101,800 Build&Equip-HC 190,875 190,875 Build&Equip-HC 636,250 636,250 Аcc Dep 95,438 114,525 Acc Dep 161,813 Build&Equip-Net Total Assets 193,625 95,438 76,350 Build&Equip-Net Investment in Subsidiary (Sanchez) 474,438 442,625 349,938 402,441 213,273 247,133 Goodwill Differential AP 44,538 46,764 Total Assets 1,501,390 1611375 Bonds Payable 63,625 63,625 Total Liabilities 108,163 110,389 АР 89,075 97,983 Shareholders Equity Bonds Payable 496,275 496,275 Common Stock 63,625 63,625 Total Liabilities Retained Earnings (from above) Total Shareholders Equity 585.350 594,258 178,150 228.426 Shareholders Equity 241.775 292.051 Common Stock 509,000 509,000 TL +TSE 349,938 402,441 Retained Earnings (from above) 407,040 508,117 Total Shareholders Equity 916,040 1,017,117 TL +TSE 1,501,390 1,611,375 Praxis Sanchez INCOME STATEMENT Sanchez Sanchez Praxis Praxis 12/31/11 12/31/12 12/31/11 12/31/12 INCOME STATEMENT Sales 890,750 979,825 Sales 509,000 534,450 CGS 636,250 699,875 Income from Subsidiary Deprec and Amort 31,813 31,813 Total Sales 509,000 534,450 Other Expenses 95,438 104,981 CGS 318,125 331,359 Company Net Income 127,250 143,156 Deprec and Amort 19,088 19,088 Income from Subsidiary (Sanchez) 53,415 58,998 Other Expenses 95,438 100,209 Net Income 180,665 202,155 Net Income 76,350 83,794 STATEMENT OF RETAINED EARNINGS STATEMENT OF RETAINED EARNINGS Retained Earnings (BOY) 127,250 178,150 Retained Earnings 1/1/X7 290,000 407,040 Net Income (from Above) 76,350 83,794 Net Income (from Above) 180,665 202,155 Dividends Declared 25,450 33,518 Dividends Declared 63,625 101,077 Retained Earnings (EOY) 178,150 228,426 Retained Earnings 12/31/X7 407,040 508,117 BALANCE SHEET BALANCE SHEET Cash 31,813 60,138 Cash 400,117 476,878 AR 69,988 80,168 AR 89,075 97,983 Inventory 127,250 160,335 Inventory 222,688 244,956 Land 25,450 25,450 Land 101,800 101,800 Build&Equip-HC 190,875 190,875 Build&Equip-HC 636,250 636,250 Аcc Dep 95,438 114,525 Acc Dep 161,813 Build&Equip-Net Total Assets 193,625 95,438 76,350 Build&Equip-Net Investment in Subsidiary (Sanchez) 474,438 442,625 349,938 402,441 213,273 247,133 Goodwill Differential AP 44,538 46,764 Total Assets 1,501,390 1611375 Bonds Payable 63,625 63,625 Total Liabilities 108,163 110,389 АР 89,075 97,983 Shareholders Equity Bonds Payable 496,275 496,275 Common Stock 63,625 63,625 Total Liabilities Retained Earnings (from above) Total Shareholders Equity 585.350 594,258 178,150 228.426 Shareholders Equity 241.775 292.051 Common Stock 509,000 509,000 TL +TSE 349,938 402,441 Retained Earnings (from above) 407,040 508,117 Total Shareholders Equity 916,040 1,017,117 TL +TSE 1,501,390 1,611,375

Answer rating: 100% (QA)

Praxis Corporation 1 Purchased differential in dollars 179215178945 270 Building and equipment 55 2... View the full answer