Pontiac, Inc. purchased Seville, Comp. on 7/1/2018 for $5,000,000 in cash plus promised to pay an additional $500,000 to Seville shareholders on 1/1/2021 contingent upon Seville meeting or exceeding specific revenue targets in 2019 and 2020. Pontiac estimated the fair value of this contingent consideration to be $200,000 on 7/1/2018.

Seville 's summary balance sheet on the acquisition date appears below.

Seville Balance Sheet – as of 7/1/2018

Cash		$500,000			Current Liabilities		$500,000
Inventory		300,000			Bonds Payable		300,000
Building		600,000
Equipment		1,950,000			Common Stock		500,000
Land		450,000			APIC		2,000,000
Goodwill		200,000			Retained Earnings		700,000
Total Assets		$4,000,000			Total Liab. and Shareholders’ Eq.		$4,000,000

On 7/1/18, book and fair values of Seville’s identifiable net assets agreed except for:
	Book Value	Est. Fair Value
Inventory	$300,000	$350,000
Building	600,000	$1,000,000
Land	450,000	700,000
Bonds Payable	300,000	275,000
Goodwill	200,000	?
Unpatented Technology	-0-	200,000

Important Transactions

• The inventory above was sold by Seville in the second half of 2018
• The building has a remaining useful life of 20 years from 7/1/18. The building was sold to an unrelated company on 7/1/23 for $900,000.
• The bonds mature on 6/30/23.
• The unpatented technology has a two-year life from the 7/1/18 acquisition date.
• In 2022, Seville sold inventory to Pontiac and recognized $100,000 of sales revenue on those sales and a gross profit of $30,000. Twenty percent of this merchandise was in Pontiac’s 2022 ending inventory and was sold to their customers in 2023.
• In 2023, Seville sold additional inventory to Pontiac and recognized $120,000 of sales revenue on those sales and a gross profit of $40,000. Twenty-five percent of this merchandise was in Pontiac’s 2023 ending inventory. Pontiac owes Seville $25,000 on 12/31/23 as a result of these intercompany sales.
• On July 1, 2022, Seville sold equipment to Pontiac and recognized a $40,000 gain on sale. The equipment has a remaining life of five years from the sale date and remains on Pontiac’s books as of 12/31/23.
• On September 15, 2023, Pontiac sold land to Seville and recorded a $50,000 gain on sale. This land remains on Seville’s books as of 12/31/23.
• On December 31, 2023, Pontiac determined that the goodwill recognized in the Seville acquisition was impaired. The fair value of Seville was estimated to be $275,000 less than Seville book value on this date.

Required –
1 - Prepare the AAP Schedule
2 – Prepare a schedule of amortizations for the years 2018 - 2023

3 – Prove that Pontiac has correctly computed 2023 equity method income
5 - Complete the worksheet for 2023 

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Income Statement Sales Equity Loss from Stansbury Gain on Sale of Land Gain on Sale of Building Interest Revenue Cost of Goods Sold Depreciation Expense Interest Expense Net Income Retained Earnings Retained Earnings Net Income Dividends RE-12/31/23 Balance Sheet Cash Inventory Other Current Assets Investment in HTM Bonds Equipment (net) Land Buildings (net) Investment in Stansbury Goodwill Total Assets Current Liabilities Bonds Payable Premium on Bonds Payable Common Stock APIC Retained Earnings Total Liabilities & SE Pontiac 1,033,500 (133,500) 50,000 10,000 (600,000) (120,000) (50,000) 190,000 4,320,000 190,000 (40,000) 4,470,000 238,000 150,000 145,000 105,000 900,000 2,200,000 1,800,000 6,262,000 11,800,000 150,000 180,000 7,000,000 4,470,000 11,800,000 Seville 450,000 450,000 (250,000) (100,000) (50,000) 500,000 2,400,000 500,000 (100,000) 2,800,000 300,000 50,000 150,000 900,000 2,400,000 2,000,000 200,000 6,000,000 90,000 600,000 10,000 500,000 2,000,000 2,800,000 6,000,000 Debit Credit Consolidated Statements Income Statement Sales Equity Loss from Stansbury Gain on Sale of Land Gain on Sale of Building Interest Revenue Cost of Goods Sold Depreciation Expense Interest Expense Net Income Retained Earnings Retained Earnings Net Income Dividends RE-12/31/23 Balance Sheet Cash Inventory Other Current Assets Investment in HTM Bonds Equipment (net) Land Buildings (net) Investment in Stansbury Goodwill Total Assets Current Liabilities Bonds Payable Premium on Bonds Payable Common Stock APIC Retained Earnings Total Liabilities & SE Pontiac 1,033,500 (133,500) 50,000 10,000 (600,000) (120,000) (50,000) 190,000 4,320,000 190,000 (40,000) 4,470,000 238,000 150,000 145,000 105,000 900,000 2,200,000 1,800,000 6,262,000 11,800,000 150,000 180,000 7,000,000 4,470,000 11,800,000 Seville 450,000 450,000 (250,000) (100,000) (50,000) 500,000 2,400,000 500,000 (100,000) 2,800,000 300,000 50,000 150,000 900,000 2,400,000 2,000,000 200,000 6,000,000 90,000 600,000 10,000 500,000 2,000,000 2,800,000 6,000,000 Debit Credit Consolidated Statements

Answer rating: 100% (QA)

Ill provide the information requested based on the provided description 1 AAP Schedule Allocated Acq... View the full answer