Eliminating Entries, Previously Unreported Intangibles, Goodwill Pirin Company a
ID: 2331921 • Letter: E
Question
Eliminating Entries, Previously Unreported Intangibles, Goodwill
Pirin Company acquires all of the voting stock of Skoda Automotive for $40 million in cash. Skoda’s balance sheet accounts at the date of acquisition are listed below.
Date-of-acquisition book values approximate fair value for all reported assets and liabilities. The following previously unreported intangibles are identified as belonging to Skoda, along with their estimated fair values at the date of acquisition (in millions):
Required
a. Prepare a schedule calculating the goodwill to be recognized for this acquisition.
Do not use negative signs with your answers.
Enter answers in millions (do not round answers).
b. Prepare the eliminating entries necessary to consolidate the balance sheet accounts of Pirin and Skoda at the date of acquisition.
Enter answers in millions. Do not round answers.
(in millions) Dr (Cr) Current assets $1.2 Property, plant and equipment 10.8 Current liabilities (2.0) Long-term liabilities (7.9) Capital stock (0.8) Retained earnings (1.6) Accumulated other comprehensive income 0.3 Total $0.0Explanation / Answer
(A) Calculation of Goodwill ($ in Millions) Acquisition cost $40 Skoda’s book value $24 Excess of acquisition cost over book value $16 Order backlogs $1.5 Developed technology $6 $7.5 Goodwill($16-$7.5) $8.5 (B) Eliminating Entries S.NO PARTICULARS DR.($ in millions) CR.($ in millions) 1 Investment in skoda 24.00 capital stock 8.00 Retained earnings 16.00 2 Order Backlogs 1.5 Developed Technology 6 Goodwill 7.5 TOTAL 31.5 31.5
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