Equity Method and Eliminating Entries, First Year

On January 1, 2020, Playtel Inc. acquired all of the stock of San Jose Cable for $250 million in cash. At the date of acquisition, Playtels shareholders equity accounts were as follows (in thousands):

Common stock, $1 par	$5,000
Additional paid-in capital	25,000
Retained deficit	(1,000)
Treasury stock	(800)
Total	$28,200

Both companies have a December 31 year-end. At the date of acquisition, San Joses reported net assets had book values approximating fair value. However, it had previously unreported indefinite-life identifiable intangibles valued at $50 million, meeting ASC Topic 805 requirements for capitalization. Impairment losses in 2020 for identifiable intangibles were $1 million. Goodwill from this acquisition was not impaired in 2020. San Jose reported net income of $4 million in 2020, and paid no dividends. Playtel uses the complete equity method to report its investment in San Jose on its own books.

Required

a. Calculate the original amount of goodwill for this acquisiton.

$Answer

Mark 0.00 out of 1.00

(in thousands)

b. Calculate equity in net income of San Jose, reported on Playtels books in 2020.

$Answer

Mark 0.00 out of 1.00

(in thousands)

c. Prepare eliminating entries (C), (E), (R) and (O), required to consolidate Playtels trial balance accounts with those of San Jose on December 31, 2020.

Enter numerical answers in thousands.

Ref.	Description		Debit	Credit
(C)	Answer
	Answer
(E)	Common stock, $1 par
	Answer
	Answer
	Treasury stock
	Investment in San Jose
(R)	Identifiable intangibles
	Answer
	Answer
(O)	Answer
	Answer