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1.On January 1, 2020, Paloma Corporation exchanged $1,710,000 cash for 90 percent of the outstanding voting stock of San Marco Company. The consideration transferred by Paloma provided a reasonable basis for assessing the total January 1, 2020, fair value of San Marco Company. At the acquisition date, San Marco reported the following owners' equity amounts in its balance sheet: Common stock Additional paid-in capital Retained earnings $400,000 60,000 265,000 In determining its acquisition offer, Paloma noted that the values for San Marco's recorded assets and lobilities approximated their fair values. Paloma also observed that San Marco had developed internally a customer base with an assessed fair value of $800,000 that was not reflected on San Marco's books. Paloma expected both cost and revenue synergies from the combination. At the acquisition date, Paloma prepared the following fair-value allocation schedule: Fair value of San Marco Company Book value of San Marco Company Excess fair value to customer base (10-year remaining life) to goodwill $ 1,900,000 725,000 1,175,000 800,000 $ 375,000
At December 31, 2021, the two companies report the following balances: San Marco $ (675,000) 322, 000 120,000 11,000 7,000 0 Ravenues Cost of goods sold Depreciation expense Amortization expense Interest expense Equity in income of San Marco Net income Retained earnings, 1/1 Net income Dividends declared Retained earnings, 12/31 Current assets Investment in San Marco Buildings and equipment Copyrights Total assets Accounts payable Notes payable Common stock Additional paid-in capital Retained earnings, 12/31 Total liabilities and equities Paloma $(1,843,000) 1,100,000 125,000 275,000 27,500 (121, 500) $ (437,000) $(2,625, 000) (437,000) 350,000 $(2,712,000) $ 1,204,000 1,854,000 931,000 950,000 $ 4,939,000 $ (485,000) (542,000) (900,000) (300,000) (2,712,000) $(4,939,000) $ (215,000) $ (395,000) (215,000) 25,000 $ (585,000) s 430,000 0 1863,000 107 000 $ 1,400,000 $ (200,000) (155,000) (400,000) (60,000) |(585,000) $(1,400,000) $ At year-end, there were no intra-entity receivables or payables.
At year-end, there were no intra-entity receivables or payables. a. Determine the consolidated balances for this business combination as of December 31, 2021. b. If instead the noncontrolling interest's acquisition-date fair value is assessed at $167,500, what changes would be evident in the consolidated statements? Answer is not complete. Complete this question by entering your answers in the tabs below. Required A Required B Determine the consolidated balances for this business combination as of December 31, 2021. (For accounts where multiple consolidation entries are required, combine all debit entries into one amount and enter this amount in the debit column of the worksheet. Similarly, combine entries into one amount and enter this amount in the credit column of the worksheet. Input all amounts as positive values.) PALOMA CORPORATION AND SAN MARCO COMPANY Consolidation Worksheet For Year Ending December 31, 2021 Consolidation Entries Paloma San Marco Debit Credit (1,843.000) (675.000) 1,100,000 322,000 Accounts Noncontrolling Interest Consolidated Totals Revenues $ (2,518,000) 1,422,000 Cost of goods sold.

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1. What do we mean by independence and how can a CPA demonstrate independence?

2. Why can't the external auditor also be the internal auditor for a public company who has to comply with SOX?