In: Accounting
Date of Acquisition Consolidation Eliminating Entries
Pennant Corporation acquired 80 percent of Saylor Company's
common stock for $6,000,000 in cash on January 2, 2013. At that
date, Saylor's $3,600,000 of reported net assets were fairly
stated, except land was undervalued by $300,000 and unrecorded
developed technology was valued at $600,000. The estimated fair
value of the noncontrolling interest is $1,200,000 at the
acquisition date.
(a) Calculate total goodwill and its allocation to the controlling
and noncontrolling interests.
Enter answers using all zeros (do not abbreviate to in thousands or in millions).
Allocation of goodwill between controlling and noncontrolling interest: | |
---|---|
Total goodwill | Answer |
Pennant's goodwill | Answer |
Goodwill to noncontrolling interest | Answer |
(b) Prepare the working paper eliminating entries needed to consolidate Pennant and Saylor on January 2, 2013.
Enter answers using all zeros (do not abbreviate to in thousands or in millions).
ConsolidationJournal | ||
---|---|---|
Description | Debit | Credit |
(E) | ||
AnswerCashShareholders' equity - SaylorInvestment in Saylor | Answer | Answer |
AnswerInvestment in SaylorCashShareholders' equity - Saylor | Answer | Answer |
Noncontrolling interest in Saylor | Answer | Answer |
(R) | ||
AnswerLandInvestment in SaylorCash | Answer | Answer |
Developed technology | Answer | Answer |
Goodwill | Answer | Answer |
AnswerInvestment in SaylorLandCash | Answer | Answer |
Noncontrolling interest in Saylor | Answer | Answer |
Please answer all parts of the question.
ANSWER
a | ||
Calculation of goodwill: | ||
Acquisition cost | 6,000,000 | |
Fair value of noncontrolling interest | 1,200,000 | |
Total Fair Value | 7,200,000 | |
Book Value of Saylor’s | 3,600,000 | |
Revaluations: | ||
Land | (300,000 ) | |
unrecorded developed technology | 600,000 | 3,900,000 |
Goodwill | 3,300,000 |
Allocation of goodwill between controlling and noncontrolling interest: | |
Total goodwill | 3,300,000 |
Pennant's goodwill(6,000,000 -80%of 3,900,000) | 2,288,000 |
Goodwill to noncontrolling interest | 420,000 |
b | |||
Transaction | Account Description | Debit | Credit |
E | Stockholders’ equity – Saylor | 3,600,000 | |
Investment in Saylor(80%) | 2,880,000 | ||
Noncontrolling interest in Saylor(20%) | 720,000 | ||
R | |||
Unrecorded developed technology | 600,000 | ||
Goodwill | 3,300,000 | ||
Land |
300,000 |
||
Investment in Saylor* | 2,070,400 | ||
Noncontrolling interest in Saylor | 144,000 | ||
*2,288,000+80%(600,000-300,000)= 2,070,400 | |||
*420,000+20%(600,000-300,000)= 144,000 |
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