On June 30, 2014, Pewter Ltd. gave 28,000 shares to Sterling Co. in exchange for 70% of Sterling's outstanding shares. At the time of the exchange, Pewter's shares had a fair value of $22.50 per share. The post-acquisition statements of financial position and Sterling's fair values are shown below.
Statement of Financial Position
As of June 30, 2014

Required:
(a) Calculate Pewter's consolidated goodwill.
(b) Prepare Pewter's consolidated statement of financial position at June 30, 2014 using the entity theory method of consolidation.

Transcribed Image Text:

Sterling Co.--- Fair Value Pewter Ltd. Book value Assets: Current assets: Cash Accounts receivable Inventory S 750,000 S37,500 $ 37,500 1,500,000 112,500 112,500 37,500 187,500 37,500 150,000 2,400,000 Non-current assets: Land Equipment Accumulated amortization Investment in Sterling 225,000 375,000 750,000 2,250,000 (900,000) 112,500) 630,000 2,730,000 300,000 412500 487,500 Total assets S5,130,000 675,000 Liabilities and shareholders' equity: Current liabilities: Accounts payable Loan payable 750,000 75,000 75,000 300,000 1,050,000 75,000 Shareholders' equity: Common shares Retained earnin 2,580,000 1,500,000 150,000 gs 450,000 4,080,000 600,000 Total liabilities and shareholders' equity $5,130,000 S 675,000