Question

In: Accounting

Date of Acquisition Consolidation Eliminating Entries Pennant Corporation acquired 80 percent of Saylor Company's common stock...

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.

Solutions

Expert Solution

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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