Question
During 2020, Palo Companys whollyowned subsidiary, Safe Inc. reported net income of $1,600,000 and declared and paid dividends of $600,000. Palo acquired Safe on January
During 2020, Palo Companys whollyowned subsidiary, Safe Inc. reported net income of $1,600,000 and declared and paid dividends of $600,000. Palo acquired Safe on January 2, 2020, at a cash cost of $8,000,000, which was $1,000,000 in excess of the book value of net assets acquired. Safes equipment (five-year life) was undervalued by $500,000. Its inventory, reported using FIFO, was undervalued by $200,000. The remaining $300,000 could not be allocated to identifiable assets and liabilities. Impairment testing indicates that goodwill was impaired by $50,000 during 2020. Safes beginning inventory was sold during 2020.
a. Prepare the journal entries recorded by Palo in 2020 to record the acquisition and apply the complete equity method.
Enter numerical answers using all zeros (do not abbreviate in thousands or in millions). 3 journal entries
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