On December 31, 2016, Paladium International purchased 100% of the outstanding c

Question

On December 31, 2016, Paladium International purchased 100% of the outstanding common stock of Sennex Chemical inc.. Paladium paid $200,000 for the shares and determined that the fair value of all recorded Sennex assets and liabilities approximated their book values, with the exception of a customer list not recorded on their books that had a fair value of $10,000 and an expected remaining useful life of 5 years. At the time of purchase, Sennex had stockholders’ equity consisting of common stock of $20,000 and retained earnings of $80,000. Any remaining excess fair value was attributed to goodwill. The separate financial statements at December 31, 2017 appear in the first two columns of the consolidation workpapers shown below. Required: Complete the consolidation workpapers for Paladium and Sennex for the year 2017. Paladium Sennex Elimination Debits Entries Credits Consolidated Balance Sheet INCOME STATEMENT Sales $ (331,900) $ (48,000) Income of Sennex (13,000) Cost of Sales 148,000 25,000 Other Expenses 72,000 8,000 Net Income $ (124,900) $ (15,000) Retained Earnings 1/1 $ (846,000) $ (80,000) Add: Net Income (124,900) (15,000) Less: Dividends 9,000 4,000 Retained Earnings 12/31 $ (961,900) $ (91,000) BALANCE SHEET Cash $ 135,000 $ 64,000 Accounts Receivable-net 227,000 160,000 Inventories 316,000 86,000 Land 80,000 40,000 Equipment and Buildings-net 410,200 230,000 Investment in Sennex 209,000 Customer List Goodwill Total Assets $1,377,200 $ 580,000 LIAB. & EQUITY Accounts Payable $ (305,300) $ ( 469,000) Common Stock $ (110,000) $ (20,000) Retained Earnings-12/31 (961,900) (91,000) TOTAL LIAB. AND EQUITY $(1,377,200) $ (580,000)

Explanation / Answer

Consolidation workpapers for Paladium and Sennex for the year 2017

Investment Elimination Entry

Consolidation Balance Sheet for Paladium and Sennex for the year 2017

Eliminations Particular Paladium Sennex Debit Credit Consolidated Cash 135000 64000 199000 Accounts Receivable 227000 160000 387000 Inventories 316000 86000 402000 Land 80000 40000 120000 Equipment and Buildings 410200 230000 640200 Investment in Sennex 209000 0 209000 0 Goodwill 0 0 109000 109000 Total Assets 1377200 580000 1857200 Accounts Payable 305300 469000 774300 Common Stock 110000 20000 20000 110000 Retained Earnings 961900 91000 80000 972900 Total Liabilities 1377200 580000 1857200

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