question archive On January 1, 2020, Procise Corporation acquired 100 percent of the outstanding voting stock of GaugeRite Corporation for $2,005,200 cash

On January 1, 2020, Procise Corporation acquired 100 percent of the outstanding voting stock of GaugeRite Corporation for $2,005,200 cash

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On January 1, 2020, Procise Corporation acquired 100 percent of the outstanding voting stock of GaugeRite Corporation for $2,005,200 cash. On the acquisition date, GaugeRite had the following balance sheet: Cash Accounts receivable Land Equipment (net) Total assets $ 16,000 145,000 755,000 1,928,000 $ 2,844,088 Accounts payable Long-term debt Common stock Retained earnings Total liabilities and equity 5 191, 80e 943,000 1,058,000 652,000 $ 2,844,000 At the acquisition date, the following allocation was preparedi 52,005,200 1,210,000 295,200 Fair value of consideration transferred Book Value acquired Excess for value over book value TO in process research and development To gulpment (8-year remaining life) To ochdii (indefinite life) $ 64,000 91 200 155.200 140,000 $
Although at acquisition date Procise had expected $64,000 in future benefits from GaugeRite's in-process research and development project, by the end of 2020 it was apparent that the research project was a failure with no future economic benefits. On December 31, 2021, Procise and GaugeRite submitted the following financial statements for consolidation. There were no intra- entity payables on that date.
Sales Cost of goods sold Depreciation expense Other operating expenses Subsidiary income Net income Retained earnings 1/1/21 Net income Dividends declared Retained earnings 12/31/21 Cash Accounts receivable Inventory Investment in GaugeRite Land Equipment (net) Goodwill Total assets Accounts payable Long-term debt Common stock Retained earnings 12/31/21 Total liabilities and equity Procise $ (3,849,400) 1,792,500 335,000 223,500 (256,600) $ (1,755,000) $ (3,092,500) (1,755,000) 300,000 $ (4,547,500) 88,550 886,000 974,000 2,483,950 3, 170,000 5,185,000 332,000 $ 13,039,500 (217,000) (3, 125,000) (5,150,000) (4,547,500) $(13,039,500) uaugerite $(1,385,500) 872,500 132,000 33,000 @ $ (268,000) $ (896,000) (268, eee) 26,450 $(1,137,558) $ 57,550 241,000 803,000 710,000 1,750,000 @ $ 3,561,550 $(496,000) (870,000) (1,058,000) (1.137,550) $(3,561,550)
a. Show how Procise derived its December 31, 2021, Investment in GaugeRite account balance c. Prepare a consolidated worksheet for Procise and GaugeRite as of December 31, 2021.

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ANSWER:-

a)

consideration trasnfered 1/1/20 2005200
Increase in GaugeRite’s retained earnings to 1/1/21 (896000-652000) 244000
In-process R&D write-off in 2020 (64000)
Amortizations 2020(91200/8) (11400)
Income 2021 268000
Dividends declared 2020 (26450)
Amortization 2020 (11400)
Investment balance 12/31/21 2403950

b)

PRECISE AND SUBSIDIARY GAUGRITE
CONSOLIDATED WORKSHEET
for the year ended dec 31,2021
      consolidated entries  
accounts

12/31/21

procise

12/31/21

gaugrite

debit credit

consolidated

totals

sales (3849400) (1305500)     (5154900)
cost of goods sold 1792500 872500     266500
depreciation expense 335000 132000 11400   359600
other operating expenses 223500 33000     256500
subsidiary income (256600) 0 256600   0
net income (1755000) (268000)     (2023000)
           
Retained earnings 1/1/21 (3092500) (896000) 896000   3092500
net income (1755000) (268000)     (2023000)
dividends declared 300000 26450   26450 300000
retained earnings 1/1/21 (4547500) (1137550)     (5685050)
cash 88550 57550     146100
accounts recievable 886000 241000     1127000
inventory 974000 803000     1777000
Investment in GuageRite 2403950 0 26450 2430400 0
land 3170000 710000     3880000
Equipment (net) 5185000 1750000 79800 11400 7026200
Goodwill 332000 0 135000    
total assets 13039500 3561550      
accounts payable (217000) (496000)      
long term debt (3125000) (870000)      
common stock procise (515000)        
common stock-guagerite   (1058000)      
retained earnings 1/1/21 (4547500) (1137550)      
total liabilities and equity (13039500) (35615500    

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