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 understated by \($1\) million, and its other assets and liabilities are fairly reported.

Required

a. Calculate the goodwill for this acquisition.

b. Present the working paper eliminating entries necessary to consolidate the balance sheets of Pendragon and Sherwood at the date of acquisition.

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(in millions) Common stock, par. Additional paid-in capital Retained earnings (deficit) Accumulated other comprehensive loss Treasury stock.. Total stockholders' equity (deficit). $ 5 15 (40) $(25)