Question

The Blimp Rider Incorporated Acquired 100 percent of Parcel Parachute Corporation's common stock on September 30, 2012, by issuing 35,000 shares of its $1 par value common stock, which at the time of issuance had a fair market value of $20.00 per share. The Book Value of Parcel Parachute Corporation's Net Assets on September 30, 2012 is $435,000. Blimp Rider Incorporated uses the equity method for internal recordkeeping to monitor the activities of Parcel Parachute Corporation.

At the acquisition date, the carrying amounts of Parcel Parachute Corporation's assets and liabilities were generally equivalent to the fair value except for the following:

Assets/Liabilities

Buildings (Net)

Equipment(Net)

Patents

Loan Payable

Book Value

$300,000.00

$65,000.00

$0.00

($250,000.00)

Fair Value

$390,000.00

$110,000.00

$55,000.00

($275,000.00)

Reaming Useful Life

25 Years

15 Years

10 Years

5 Years

Calculate the Goodwill attributed to Blimp Rider Inc.'s acquisition of Parcel Parachute Corp:

Subsequent to the acquisition Parcel Parachute Inc reported the following:

2012

2013

2014

Net Income

$70,000.00

$71,000.00

$73,500.00

Dividends Declared

$15,000.00

$16,000.00

$18,000.00

On December 31, 2014 Parcel Parachute Incorporated accounts payable included a $15,000 liability owed to Blimp Rider Incorporated.

The following consolidated worksheet for Blimp Rider Incorporated and Parcel Parachute Corporation is to be used along with the information provided above to determine the consolidated entry balances "1)" through "6)" below:

	Blimp Rider Incorporated & Parcel Parachute Corporation
	Consolidated Worksheet
Investments: Equity Method	For Year Ending Dec ember 31, 2014
Accounts		Blimp Rider Incorporated		Parcel Parachute Corporation		Consolidated Entries				Consolidated Totals
						Debit		Credit
Income Statement
Sales Revenue		($3,500,000)		($990,000)
Cost of Goods Sold		$1,985,000		$550,000
Interest Expense		$105,000		$32,500			5
Depreciation Expense		$356,000		$25,000	5
Amortization Expense				$0	5
Equity in Investee Income		($66,400)			1
Net Income		($1,120,400)		($382,500)
Statement of Retained Earnings
Retained Earnings 1/1/14		($3,450,000)		($343,750)	2
Net Income		($1,120,400)		($382,500)
Dividends Declared		$325,000		$18,000			4
Retained Earnings 12/31/14		($4,245,400)		($708,250)
Balance Sheet
Assets:
Cash		$1,245,000		$569,750
Accounts Receivable		$85,000		$25,000			6
Supplies		$985,000		$12,500
Inventory		$750,000		$91,000
Investment in Parcel Parachute C		$808,275			4		3
							2
							1
Buildings (Net)		$1,800,000		$300,000	3		5
Land		$1,113,150		$120,000
Equipment (Net)		$112,500		$65,000	3		5
Patents		$251,975		$0	3		5
Goodwill		$240,000			3
Total Assets		$7,390,900		$1,183,250						$8,013,650
Liabilities:
Loan Payable		($785,000)		($250,000)	5		3
Accounts Payable		($165,000)		($49,500)	6
Salaries & Wages Payable		($2,500)		($15,500)
Total Liabilities		($952,500)		($315,000)
Owners Equity:
Common Stock		($610,500)		($160,000)	2
Additional Paid in Capital		($1,582,500)
Retained Earnings 12/31/14		($4,245,400)		($708,250)
Total Owners Equity		($6,438,400)		($868,250)
Total Liabilities & Owners Equity		($7,390,900)		($1,183,250)		$895,125		$895,125		($8,013,650)

Answer 1