Pecos Company acquired 100 percent of Suaro’s outstanding stock for $1,450,000 cash on January 1, 20

Pecos Company acquired 100 percent of Suaro’s outstanding stock for $1,450,000 cash on January 1, 20

Pecos Company acquired 100 percent of Suaro’s outstanding stock for $1,450,000 cash on January 1, 2017, when Suaro had the following balance sheet:

Additional Information

Although at acquisition date Pecos expected future benefits from Suaro’s in-process research and development (R&D), by the end of 2017 it became clear that the research project was a failure with no future economic benefits.

During 2017, Suaro earns $75,000 and pays no dividends.

Selected amounts from Pecos and Suaro’s separate financial statements at December 31, 2018, are presented in the consolidated information worksheet. All consolidated worksheets are to be prepared as of December 31, 2018, two years subsequent to acquisition.

Pecos’s January 1, 2018, Retained Earnings balance—before any effect from Suaro’s 2017 income—is $(930,000) (credit balance).

Pecos has 500,000 common shares outstanding for EPS calculations and reported $2,943,100 for consolidated assets at the beginning of the period.

Using separate worksheets, prepare Pecos’s trial balances for each of the indicated accounting methods (equity, initial value, and partial equity). Use only formulas for the Investment in Suaro, the Income of Suaro, and Retained Earnings accounts.

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