E5.6 Date of Acquisition Consolidation Eliminating Entries, Bargain Purchase pany acquired 80 percent of Sparrow Company's common stock for $20,000,000 in cash,; fees paid to an outside firm to estimate the earning power of Sparrow and the fair values of its properties amounted to $2,500,000. Sparrow's equity consisted of $3,000,000 in capital stock, $25,000,000 in retained earnings, $1,500,000 in accumulated other comprehensive loss, and $500,000 in treasury stock. Book values of Sparrow's identifiable assets and liabilities approximated their fair values except as noted below: Peregrine Com- Book value Fair value Land $1,000,000 6,000,000 $ 300,000 4,000,000 3,000,000 Assume that the fair values above have been carefully evaluated for accuracy. The fair value of the non- controlling interest is estimated to be $4,000,000 at the date of acquisition. Required a. Calculate the gain on acquisition and prepare Peregrine's acquisition entry. b. Prepare the working paper eliminating entries needed to consolidate Peregrine and Sparrow at the date of acquisition