Simple Trial Balance Consolidation Working Paper, First and Second Years

On January 1, 2019 Pacnet Communications acquired all the stock of SecureWorks Inc. at a cost of $40,000,000 in cash. The $34,000,000 excess of acquisition cost over book value was allocated as fllows:

Plant Assets(5,000,000)10 year life straight line

Identifiable Intangible Assets2,000,0005 Years life, straight line

Goodwill37,000,000Impairment loss 2019:1,000,000; Impairment Loss in 2020: 1,500,000

Total: 34,000,000

Both companies have December 31 year ends. Trial Balances of Pacnet and Secure works at December 31,2019 and 2020 appear below. Pacnet uses the complete equity method to report its investment in SecureWorks on its own books.

Chapter 4 . Consolidated Financial Statements Subsequent to Acquisition Pacnet, December 31 SecureWorks, December 31 2020 Dr (Cr) 2019 Dr (Cr) 2020 Dr (Cr) 2019 Dr (Cr) Current assets . . . $ 4,000,000 $ 3,000,000 $ 3,500,000 $ 2,000,000 Plant assets, net. . . . 66,200,000 58,000,000 45,000,000 42,000,000 Identifiable intangible assets .. 800,000 1,000,000 Investment in SecureWorks . . . . . 43,200,000 42, 100,000 Liabilities. . . .... (85,000,000) (80,000,000) (37,000,000) (35,000,000) Capital stock . . ... (5,000,000) (5,000,000) (1,000,000) (1,000,000) Retained earnings, beginning. . .. (19, 100,000) (12,000,000) (8,000,000) (5,000,000) Sales revenue . . . . .. . (1 10,000,000) (100,000,000) (65,000,000) (60,000,000) Equity in net income of SecureWorks . . . (1, 100,000) (2, 100,000) Cost of sales. . . . . . 82,000,000 80,000,000 46,000,000 45,000,000 Operating expenses . 24,000,000 15,000,000 16,500,000 12,000,000 Total . . . . $ 0 $ 0 $ 0 $ 0 Required a. Prepare a working paper to consolidate the trial balances of Pacnet and Secure Works at December 31, 2019, and prepare a consolidated balance sheet at December 31, 2019 and a consolidated income statement for 2019. b. Repeat the requirements of a. for the year 2020