Appraisals indicate that book values are representative of fair values with the exception of the land and building. The land has a fair value of $180,000, and the building is appraised at $470,000. The building has an estimated remaining life of 20 years. Any remaining excess is goodwill.
The following summary of Sauder’s retained earnings applies to 2011 and 2012:
Balance, January 1,2011. . . .. …. .. . …. .. . $250,000
Net income for 2011. . . . . .. …. .. . …. .. . 60,000
Dividends paid n 2011. . . .. …. .. . …. .. . (10,000)
Balance, December 31, 2011 . .. .. .. . .. .. .. . $300,000
Net income for 2012. . . . . .. …. .. . …. .. . 50,000
Dividends paid in 2012. . . .. …. .. . …. .. . (10,000)
Balance, December 31, 2012 . .. .. .. . .. .. .. . $340,000
Required
1. Prepare a value analysis and a determination and distribution of excess schedule for the investment in Sauder Company. As a part of the schedule, indicate annual amortization of excess adjustments.
2. For 2011 and 2012, prepare the entries that Portico would make concerning its investment in Sauder under the simple equity, sophisticated equity, and cost methods. You may want to set up a worksheet with side-by-side columns for each method so that you can easily compare the entries.
3. For 2011 and 2012, prepare the worksheet elimination that would be made on a consolidated worksheet under the simple equity, sophisticated equity, and cost methods. You may want to set up a worksheet with side-by-side columns for each method so that you can easily compare the entries.