Eliminating Entries, Goodwill

On February 15, 2010, Pendragon Corporation acquired all of the stock of Sherwood, Inc. for $300 million in cash. Sherwood's stockholders' equity accounts at the date of acquisition were as follows:

(in millions)
Common stock, par	$5
Additional paid-in capital	15
Retained earnings (deficit)	(30)
Accumulated other comprehensive income	4
Treasury stock	(3)
Total stockholders' equity (deficit)	$(9)

The following previously unreported assets of Sherwood were reported in the acquisition (in millions):

Customer lists	$40
Brand names	60

Assume Sherwood's fixed assets are overstated by $10 million, its liabilities are overstated by $1 million, and its other assets and liabilities are fairly reported. (a) Calculate the goodwill for this acquisition. $Answer

million (b) Present the working paper eliminating entries necessary to consolidate the balance sheets of Pendragon and Sherwood at the date of acquisition. (Enter answers in millions and using one decimal place.)

Consolidation Journal
Description	Debit	Credit
(E)
Common stock	Answer	Answer
Additional paid-in capital	Answer	Answer
Accumulated other comprehensive income	Answer	Answer
AnswerEquity in net income of Sherwood, Inc.Common StockCashGoodwillTreasury stockInvestment in Sherwood, Inc.Gain on purchase	Answer	Answer
Retained earnings	Answer	Answer
AnswerCommon StockGain on purchaseEquity in net income of Sherwood, Inc.Treasury stockGoodwillInvestment in Sherwood, Inc.Cash	Answer	Answer
(R)
Customer lists	Answer	Answer
Brand names	Answer	Answer
Liabilities	Answer	Answer
AnswerGain on purchaseCashCommon StockGoodwillInvestment in Sherwood, Inc.Equity in net income of Sherwood, Inc.Treasury stock	Answer	Answer
Fixed assets, net	Answer	Answer
AnswerEquity in net income of Sherwood, Inc.Gain on purchaseCashInvestment in Sherwood, Inc.Treasury stockGoodwillCommon Stock	Answer	Answer