Eliminating Entries, Goodwill

Polaris Company acquires all of the stock of SSC, Inc. for $80 million in cash. At the date of acquisition, SSCs equity consists of capital stock of $20 million, retained earnings of $32 million (credit balance), and accumulated other comprehensive income of $4 million (credit balance). SSCs books report current assets of $16 million, equipment of $120 million, and liabilities of $80 million. Starks assets and liabilities are reported on its books at amounts that approximate fair value, except that equipment with a book value of $16 million has a fair value of $24 million. Stark has no previously unreported identifiable intangible assets.

Required

Note: Provide all answers in millions.

Note: Do not use negative signs.

a. Prepare a schedule calculating the goodwill to be recognized for this acquisition.

Acquisition cost
SSCs book value
Excess of acquisition cost over book value
Excess of fair value over book value:
Equipment
Goodwill

b. Prepare working paper eliminating entries (E) and (R) to consolidate the balance sheet accounts of Polaris and SSC at the date of acquisition.

		Debit	Credit
(E)	Additional Paid-in-CapitalAOCICapital stockEquipmentGoodwillIdentifiable intangible assetsInvestment in SSCMerger expensesRetained earnings Treasury stock
	Additional Paid-in-CapitalAOCICapital stockEquipmentGoodwillIdentifiable intangible assetsInvestment in SSCMerger expensesRetained earnings Treasury stock
	Additional Paid-in-CapitalAOCICapital stockEquipmentGoodwillIdentifiable intangible assetsInvestment in SSCMerger expensesRetained earnings Treasury stock
	Additional Paid-in-CapitalAOCICapital stockEquipmentGoodwillIdentifiable intangible assetsInvestment in SSCMerger expensesRetained earnings Treasury stock
	To eliminate SSCs equity accounts against the investment account
(R)	Additional Paid-in-CapitalAOCICapital stockEquipmentGoodwillIdentifiable intangible assetsInvestment in SSCMerger expensesRetained earnings Treasury stock
	Additional Paid-in-CapitalAOCICapital stockEquipmentGoodwillIdentifiable intangible assetsInvestment in SSCMerger expensesRetained earnings Treasury stock
	Additional Paid-in-CapitalAOCICapital stockEquipmentGoodwillIdentifiable intangible assetsInvestment in SSCMerger expensesRetained earnings Treasury stock
	To revalue SSCs assets and liabilities to fair value