Eliminating Entries, Goodwill Pendragon Corporation acquired all of the stock of

Question

Eliminating Entries, Goodwill

Pendragon Corporation acquired all of the stock of Sherwood, Inc. for $400 million in cash. Sherwood’s stockholders’ equity accounts at the date of acquisition were as follows:

The following previously unreported assets of Sherwood were reported in the acquisition (in millions):

Assume Sherwood's fixed assets are overstated by $35 million, its liabilities are overstated by $1 million, and its other assets and liabilities are fairly reported.

(a) Calculate the goodwill for this acquisition.
$Answer

million

(b) Present the working paper eliminating entries necessary to consolidate the balance sheets of Pendragon and Sherwood at the date of acquisition. (Enter answers in millions).

0.00 points out of 1.00

0.00 points out of 1.00

(in millions) Common stock, par $5 Additional paid-in capital 15 Retained earnings (deficit) (40) Accumulated other comprehensive loss

(2) Treasury stock (3) Total stockholders' equity (deficit) $(25)

Explanation / Answer

Solution:

Working Paper Eliminating Entries, Goodwill

Solution:

Working Paper Eliminating Entries, Goodwill

(amounts in millions) (a) Calculate the goodwill for this acquisition. Acquisition cost $400 Book value (deficit) 25 Excess of acquisition cost over book value $425 Fair value less book value: Fixed assets, net ($35) Liabilities 1 Customer lists $65 Brand names 100 $131 Goodwill $294 (b) Present the working paper eliminating entries necessary to consolidate the balance sheets of Pendragon and Sherwood at the date of acquisition. (Enter answers in millions). Consolidation Journal Description Debit Credit (E) Common stock 5 Additional paid-in capital 15 Investment in Sherwood, Inc. 25 Retained earnings 40 Treasury stock 3 Accumulated other comprehensive loss 2 AnswerInvestment in Sherwood, Inc.Gain on purchaseTreasury stockCashCommon StockEquity in net income of Sherwood, Inc.Goodwill 45 45 (R) Customer lists $65 Brand names 100 Goodwill $294 Liabilities 1 $460 Fixed assets, net 35 Investment in Sherwood, Inc. $425 AnswerEquity in net income of Sherwood, Inc.CashInvestment in Sherwood, Inc.Treasury stockGain on purchaseCommon StockGoodwill $460

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.