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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 $20,000,000 in cash. At the date of acquisition, Saylor’s $5,000,000 of reported net assets were fairly stated, except land was overvalued by $200,000 and unrecorded developed technology was valued at $2,000,000. The estimated fair value of the noncontrolling interest is $4,000,000 at the acquisition date.


Required
(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 at the date
of acquisition.


Enter answers using all zeros (do not abbreviate to in thousands or in millions).

Consolidation Journal
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)
AnswerDeveloped technologyLandInvestment in SaylorCash Answer Answer
Goodwill Answer Answer
Land Answer Answer
AnswerInvestment in SaylorLandCash Answer Answer
Noncontrolling interest in Saylor Answer Answer

Solutions

Expert Solution

a
Calculation of goodwill:
Acquisition cost 2,00,00,000
Fair value of noncontrolling interest       40,00,000
Total Fair Value 2,40,00,000
Book Value of Saylor’s            50,00,000
Revaluations:
Land            (2,00,000)
unrecorded developed technology            20,00,000       68,00,000
Goodwill 1,72,00,000
Allocation of goodwill between controlling and noncontrolling interest:
Total goodwill         1,72,00,000
Pennant's goodwill(20000000-80%of 6800000)         1,45,60,000
Goodwill to noncontrolling interest            26,40,000
b
Transaction Account Description Debit Credit
E Stockholders’ equity – Saylor            50,00,000
Investment in Saylor(80%)            40,00,000
Noncontrolling interest in Saylor(20%)            10,00,000
R
Unrecorded developed technology            20,00,000
Goodwill         1,72,00,000
Land              2,00,000
Investment in Saylor*         1,60,00,000
Noncontrolling interest in Saylor            30,00,000
*14560000+80%(2000000-200000)= 16000000
*2640000+20%(2000000-200000)= 3000000


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