Acquisition and Eliminating Entries

Potluck Corp. acquired all of the stock of Sauers Corp. on June $30,2022,$ in an acquisition reported as a stock acquisition. Sauers$$ trial balance at the date of acquisition, along with the fair values of its assets and liabilities, are:

Book Value Dr $($Cr$)$ Fair Value Dr $($Cr$)$

Tangible assets $$78,000,000$ $$32,500,000$

Intangible assets $19,500,000117,000,000$

Liabilities $(72,800,000)(71,500,000)$

Capital stock $(13,000,000)$

Retained earnings $(11,570,000)$

Accumulated other comprehensive income $(130,000)$

Total $$0$

Potluck pays $$117$ million in cash and issues $1,950,000$ shares of stock to the former owners of Sauers. Potluck$$s stock has a par value of $$0\mathrm{.}01/$share$.$ The market price of the shares at the date of acquisition, $$46/$share$,$ is used to value the shares issued. Registration fees for the stock are $$650,000$ and legal and consulting fees connected with the acquisition are $$780,000,$ both paid in cash.

Required

Note: Enter all zeros with your numerical answers, do not abbreviate your answers in thousands or in millions.

a$.$ Prepare the journal entry Potluck made to record the stock acquisition on its own books on June $30,2022.$

Debit Credit

Investment in Sauers Corp.

$0$

$0$

Answer

Intangible assets

$0$

$0$

Answer

Liabilities

$0$

$0$

Answer

Common stock

$0$

$0$

Answer

Additional Paid$-$in Capital

$0$

$0$

Answer

To record the acquisition

b$.$ Prepare working paper eliminating entries $($E$)$ and $($R$)$ to combine the accounts of Potluck and Sauers at June $30,2022.$

Debit Credit

$($E$)$

Capital stock

$0$

$0$

Answer

Retained earnings

$0$

$0$

Answer

AOCI

$0$

$0$

Answer

Investment in Sauers Corp.

$0$

$0$

Answer

To eliminate Sauer's equity accounts against the investment account

$($R$)$

$0$

$0$

Answer

Intangible assets

$0$

$0$

Answer

Goodwill

$0$

$0$

Answer

Merger expenses

$0$

$0$

Answer

Cash

$0$

$0$

Answer

To revalue Sauer's assets and liabilities to fair value