Please see the directions on page 3 for preparing the solution to the problem.Pitt Corporation manufactures household appliances. On January 1, 2017, Pitt acquires Streep Corporation, a furniture manufacturer. Pitt pays $840,000 for 70% of Streeps common stock. Streep has the following balance sheet on January 1, 2017:Streep CorporationBalance SheetJanuary 1, 2017AssetsLiabilities and EquityAccounts receivable........................$ 64,000Current liabilities............................. 180,000Inventory........................................... 80,000Bonds payable................................. 200,000Land................................................... 120,000Common stock, $ 1 par.................. 20,000Buildings........................................... 500,000Paid-in capital in excess of par..... 180,000Accumulated depreciation.............(100,000)Retained earnings........................... 224,000Equipment........................................ 200,000Accumulated depreciation............. (60,000) Total assets................................$804,000 Total liabilities and equity.........$804,000Appraisal values for identifiable assets and liabilities are as follows:Accounts receivable.....................................................................................$ 64,000Inventory (sold during 2017)....................................................................... 76,000Land................................................................................................................. 300,000Buildings (20-year life)................................................................................. 600,000Equipment (5-year life)................................................................................ 200,000Current liabilities.......................................................................................... 180,000Bonds payable (5-year life)......................................................................... 192,000Any remaining excess is attributed to goodwill.

Pitt uses the simple equity method to account for its investment in Streep. Pitt and Streep have the following trial balances on December 31, 2019._________________________________________________Pitt_________ Streep_______Cash......................................................................................... 314,000 120,000Accounts Receivable............................................................. 180,000 110,000Inventory................................................................................. 240,000 172,000Land......................................................................................... 200,000 120,000Investment in Streep...................................................... 973,000Buildings..................................................................................1,600,000 600,000Accumulated Depreciation................................................... (440,000) (160,000)Equipment............................................................................... 300,000 200,000Accumulated Depreciation...................................................(180,000)(144,000)Accounts Payable..................................................................(120,000)(204,000)Bonds Payable........................................................................(200,000)Common Stock.......................................................................(200,000) (20,000)Paid-In Capital in Excess of Par............................................(1,800,000) (180,000)Retained Earnings, January 1, 2019.................................... (728,000) (364,000)Sales........................................................................................(1,600,000) (700,000)Cost of Goods Sold................................................................. 900,000 420,000Depreciation ExpenseBuildings....................................... 60,000 30,000Depreciation ExpenseEquipment.................................... 30,000 28,000Other Expenses...................................................................... 280,000 136,000Interest Expenses.................................................................. 16,000Subsidiary Income................................................................ (49,000)Dividends Declared............................................................... 40,000 20,000 Totals...................................................................... ______0_ ____ _ 0On January 1, 2019, Streep held merchandise sold to it by Pitt for $24,000. This inventory had an applicable gross profit of 35%. During 2019, Pitt sold merchandise to Streep for $120,000. On December 31, 2019, Streep held $20,000 of this merchandise in its inventory. This ending inventory held an applicable gross profit rate of 40%. Streep owed Pitt $16,000 on December 31 as a result of this intercompany sale.Pitt held $32,000 worth of merchandise in its January 1, 2019, inventory from sales from Streep. This beginning inventory had an applicable gross profit of 30%. During 2019, Streep sold merchandise to Pitt for $60,000. Pitt held $40,000 of this inventory at the end of the year. This ending inventory had an applicable gross profit of 35%. Pitt owed Streep $12,000 on December 31 as a result of this intercompany sale. On January 1, 2017, Pitt sold equipment to Streep at a gain of $80,000. Depreciation on this equipment is computed over an 8-year life, using the straight-line method.

On January 1, 2018, Streep sold equipment with a book value of $60,000 to Pitt for $108,000. This equipment has a 6-year life and is depreciated using the straight-line method. Directions:The solution to the above problem should be typed and include: (1) a value analysis; (2) a D&D schedule; (3) an amortization schedule; (4) a schedule to prepare the intercompany sales-related entries on the worksheet; (4) worksheet entries in journal entry form; (5) the completed worksheet through the consolidated balance sheet column; (6) income distribution schedules; and (7) the consolidated financial statements (income statement, statement of retained earnings and balance sheet). In preparing the financial statements, use the statements in Exhibit 3-2 (pages 137-138) as a guide.