On January 1, 2016, Pep Company acquired 80% of the common stock of Sky Company for $195,000.On this date Sky had total owners' equity of $200,000 (common stock, other paid-in capital, and retained earnings of $10,000, $90,000, and $100,000 respectively).
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Any excess of cost over book value is attributable to inventory (worth $6,250 more than cost), to equipment (worth $12,500 more than book value), and to patents.FIFO is used for inventories.The equipment has a remaining life of five years and straight-line depreciation is used.The excess attributable to the patents is to be amortized over 20 years.
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During 2016 and 2017, Pep has appropriately accounted for its investment in Sky using the simple equity method.
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On January 1, 2017, Pep held merchandise acquired from Sky for $10,000.During 2017, Sky sold merchandise to Pep for $50,000, $20,000 of which is still held by Pep on December 31, 2017.Sky's usual gross profit on affiliated sales is 50%.
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On December 31, 2016, Pep sold equipment to Sky at a gain of $10,000.During 2017, the equipment was used by Sky.Depreciation is being computed using the straight-line method, a five-year life, and no salvage value.
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Required:
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a.Using the information above or on the Figure 4-6 worksheet, prepare a determination and distribution of excess schedule.?
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b.Complete the Figure 4-6 worksheet for consolidated financial statements for the year ended December 31, 2017.?
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Question

On January 1, 2016, Pep Company acquired 80% of the common stock of Sky Company for $195,000.On this date Sky had total owners' equity of $200,000 (common stock, other paid-in capital, and retained earnings of $10,000, $90,000, and $100,000 respectively).
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Any excess of cost over book value is attributable to inventory (worth $6,250 more than cost), to equipment (worth $12,500 more than book value), and to patents.FIFO is used for inventories.The equipment has a remaining life of five years and straight-line depreciation is used.The excess attributable to the patents is to be amortized over 20 years.
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During 2016 and 2017, Pep has appropriately accounted for its investment in Sky using the simple equity method.
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On January 1, 2017, Pep held merchandise acquired from Sky for $10,000.During 2017, Sky sold merchandise to Pep for $50,000, $20,000 of which is still held by Pep on December 31, 2017.Sky's usual gross profit on affiliated sales is 50%.
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On December 31, 2016, Pep sold equipment to Sky at a gain of $10,000.During 2017, the equipment was used by Sky.Depreciation is being computed using the straight-line method, a five-year life, and no salvage value.
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Required:
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a.Using the information above or on the Figure 4-6 worksheet, prepare a determination and distribution of excess schedule.?
?
b.Complete the Figure 4-6 worksheet for consolidated financial statements for the year ended December 31, 2017.?
?
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Quizplus · Accepted Answer

The Answer of On January 1, 2016, Pep Company acquired 80% of the common stock of Sky Company for $195,000.On this date Sky had total owners' equity of $200,000 (common stock, other paid-in capital, and retained earnings of $10,000, $90,000, and $100,000 respectively).
?
Any excess of cost over book value is attributable to inventory (worth $6,250 more than cost), to equipment (worth $12,500 more than book value), and to patents.FIFO is used for inventories.The equipment has a remaining life of five years and straight-line depreciation is used.The excess attributable to the patents is to be amortized over 20 years.
?
During 2016 and 2017, Pep has appropriately accounted for its investment in Sky using the simple equity method.
?
On January 1, 2017, Pep held merchandise acquired from Sky for $10,000.During 2017, Sky sold merchandise to Pep for $50,000, $20,000 of which is still held by Pep on December 31, 2017.Sky's usual gross profit on affiliated sales is 50%.
?
On December 31, 2016, Pep sold equipment to Sky at a gain of $10,000.During 2017, the equipment was used by Sky.Depreciation is being computed using the straight-line method, a five-year life, and no salvage value.
?
Required:
?
a.Using the information above or on the Figure 4-6 worksheet, prepare a determination and distribution of excess schedule.?
?
b.Complete the Figure 4-6 worksheet for consolidated financial statements for the year ended December 31, 2017.?
?
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On January 1, 2016, Pep Company Acquired 80% of the Common