Answer:
a) Consolidated net income for Phoenix and Sedona for 2018
Phoenix revenues $648,000
-Phoenix expenses ($412,000)
Phoenix Net Income $236,000
2018 Income from Sedona <u>$54,075</u>
Consolidated net income for $290,075
Phoenix and Sedona for 2018
b) Phoenix’s consolidated retained earnings balance at December 31, 2018
Phoenix’s consolidated retained earnings balance at December 31, 2018 = $347,075.00 (same as Phoenix because of equity method use)
c) What amount should Phoenix report for Sedona’s customer list?
Consideration transferred at fair value $784,000
Book value acquired <u>($548,800)</u>
Excess fair over book value $235,200
To Equipment <u>$95,000 </u>
To customer list (4 year life) <u> $140,200
</u>
Three years since acquisition of customer list = $140,200/4 years = $35,050. Hence, Phoenix report $35,050 as Sedona’s customer list.
