In: Accounting
How do you calculate the numbers in the journal entry to record amortization of excess acquisition price?
Income from sawmill Corp $4,000
Investment in Sawmill $4,000
Powder Company spent $240,000 to acquire all of Sawmill Corporation's stock on January 1, 20X2. On December 31, 20X4, the trial balances of the two companies were as follows:
Powder Company |
Sawmill Corporation |
||||||||||||||||
Item |
Debit |
Credit |
Debit |
Credit |
|||||||||||||
Cash |
$ |
74,000 |
$ |
42,000 |
|||||||||||||
Accounts Receivable |
130,000 |
53,000 |
|||||||||||||||
Land |
60,000 |
50,000 |
|||||||||||||||
Buildings & Equipment |
500,000 |
350,000 |
|||||||||||||||
Investment in Sawmill Corporation |
268,000 |
||||||||||||||||
Cost of Services Provided |
470,000 |
130,000 |
|||||||||||||||
Depreciation Expense |
35,000 |
18,000 |
|||||||||||||||
Other Expenses |
57,000 |
60,000 |
|||||||||||||||
Dividends Declared |
30,000 |
12,000 |
|||||||||||||||
Accumulated Depreciation |
$ |
265,000 |
$ |
93,000 |
|||||||||||||
Accounts Payable |
71,000 |
17,000 |
|||||||||||||||
Taxes Payable |
58,000 |
60,000 |
|||||||||||||||
Notes Payable |
100,000 |
85,000 |
|||||||||||||||
Common Stock |
200,000 |
100,000 |
|||||||||||||||
Retained Earnings |
292,000 |
120,000 |
|||||||||||||||
Service Revenue |
610,000 |
240,000 |
|||||||||||||||
Income from Sawmill Corporation |
28,000 |
||||||||||||||||
$ |
1,624,000 |
$ |
1,624,000 |
$ |
715,000 |
$ |
715,000 |
||||||||||
Sawmill Corporation reported retained earnings of $100,000 at the
date of acquisition. The difference between the acquisition price
and underlying book value is assigned to buildings and equipment
with a remaining economic life of 10 years from the date of
acquisition. Sawmill's accumulated depreciation on the acquisition
date was $25,000. At December 31, 20X4, Sawmill owed Powder
$2,500.
Required:
a. Prepare the following journal entries recorded by Powder with
regard to its investment in Sawmill during 20X4.