Facts and Requirements

Req $2$

Req $3$

MGT $136$

HOW Chapter $4$

Facts and Requirements

On January $1,2021,$ Pinnacle Company buys $100\%$ of the voting stock of Sterling Inc. for $$150$ million in cash.

After the acquisition, the trial balance of each company $($in millions$)$ at January $1,2021,$ along with the fair value of Sterling assets and liabilities and their remaining useful lives, is:

$\backslash$table$[[,$Trial Balance,,,$],[,$Pinnacle,Sterling,$\backslash$table$[[$Sterling Fair$],[$Value$]],,],[$Current assets,$46,9,9,,],[$Investment in Sterling,$150,0,0,,],[$Property and equipment, net,$25,26,38,6$ years,$],[$Intangible assets,$14,21,16,5$ years,$],[$Current liabilities,$-29,-7,-7,,],[$Long$-$term debt,$-38,-8,-8,,],[$Equity$,-168,-41,,,],[$Total$,0,0,,,],[,,,,,]]$

Goodwill resulting from the acquisition was $$102$ million.

During $2021$ Sterling has net income of $$10$ million and pays dividends of $$1$ million.

The pre$-$closing trial balance of each company $($in millions$)$ at December $31,2021$ is:

$\backslash$table$[[,2021],[,$Pinnacle,Sterling$],[$Current assets,$52,14],[$Investment in Sterling,$158,0],[$Property and equipment, net,$33,28],[$Intangible assets,$12,19],[$Current liabilities,$-31,-6],[$Long$-$term debt,$-35,-5],[$Equity$,-168,-41],[$Dividends$,0,1],[$Sales revenue,$-151,-127],[$Cost of goods sold,$96,45],[$Operating expenses,$43,72],[$Equity in net income,$-9,0],[$Total$,0,0],[,,],[$Requirements:$,,]]$

Calculate equity in net income for Pinnacle for $2021.$

Prepare the equity method entries for the Pinnacle books for $2021.$

Prepare the $\frac{12}{31}\frac{?}{21}$ eliminating entries $($C$,$ E$,$ R and $O.$

Prepare the consolidation working papers at December $31,2021.$

Prepare the consolidated income statement for $2021.$

Prepare the consolidated balance sheet at December $31,2021.$