Question

Pennant Corporation acquired 80 percent of Saylor Company's common stock for $12,000,000 in cash on January 2, 2013. At that date, Saylor's $7,200,000 of reported net assets were fairly stated, except land was undervalued by $600,000 and unrecorded developed technology was valued at $1,200,000. The estimated fair value of the noncontrolling interest is $2,400,000 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).

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).

Answer 1

Answer:

Goodwill Calculation:
Acquisition cost	12,000,000
Non controlling interest fair value	2,400,000
Total fair value		14,400,000
Less:
Book value of assets	7,200,000
Land revaluation	600,000
R & D		1,200,000
			9,000,000
Goodwill			5,400,000
Pennant's Goodwill = 12,000,000-(80% of 9,000,000)=	4,800,000
Goodwill to non controlling interest		600,000
b.
Stockholders' Equity-Saylor	7,200,000
Investment in Saylor		5,760,000	80%
Non controlling interest in Saylor	1,440,000	20%
Land		600,000
R & D		1,200,000
Goodwill		5,400,000
Investment in Saylor		6,240,000	80%
Non controlling interest in Saylor	960,000	20%

4800000+80%(1200000+600000)= 6240000
600000+20%(1200000+600000)= 960000