Eliminating Entries, Goodwill

Pendragon Corporation acquired all of the stock of Sherwood, Inc. for $400 million in cash. Sherwoods 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)	(40)
Accumulated other comprehensive loss	(2)
Treasury stock	(3)
Total stockholders' equity (deficit)	$(25)

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

Customer lists	$65
Brand names	100

Assume Sherwood's fixed assets are overstated by $35 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).

Consolidation Journal
Description	Debit	Credit
(E)
Common stock	Answer	Answer
Additional paid-in capital	Answer	Answer
AnswerTreasury stockCommon StockInvestment in Sherwood, Inc.Gain on purchaseEquity in net income of Sherwood, Inc.GoodwillCash	Answer	Answer
Retained earnings	Answer	Answer
Accumulated other comprehensive loss	Answer	Answer
AnswerInvestment in Sherwood, Inc.Gain on purchaseTreasury stockCashCommon StockEquity in net income of Sherwood, Inc.Goodwill	Answer	Answer
(R)
Customer lists	Answer	Answer
Brand names	Answer	Answer
AnswerGoodwillEquity in net income of Sherwood, Inc.Investment in Sherwood, Inc.Treasury stockGain on purchaseCommon StockCash	Answer 0.00 points out of 1.00	Answer
Fixed assets, net	Answer	Answer
Liabilities	Answer	Answer 0.00 points out of 1.00
AnswerEquity in net income of Sherwood, Inc.CashInvestment in Sherwood, Inc.Treasury stockGain on purchaseCommon StockGoodwill	Answer	Answer