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On 1/1/20x1, Mt. Holly, Inc. paid $588,000 to acquire 100% of the outstanding common stock of Laurelton Corporation. Mt. Holly, Inc. will use the equity

On 1/1/20x1, Mt. Holly, Inc. paid $588,000 to acquire 100% of the outstanding common stock of Laurelton Corporation. Mt. Holly, Inc. will use the equity method to account for the investment.

At the acquisition date, Laurelton Corporations pre-acquisition trial balance was:

Debit

Credit

Cash and short-term investments

70,000

Accounts receivable

50,000

Supplies

20,000

Machinery and equipment, net

240,000

Buildings, net

140,000

Land

90,000

Intangible assets, indefinite life

110,000

Accounts payable

60,000

Long-term liabilities

180,000

Common stock

300,000

Additional paid-in capital

60,000

Retained earnings, 1/1/20x1

120,000

In addition, the fair value and remaining useful lives of the acquired noncurrent assets at acquisition were:

  • Land - $102,000,
  • Buildings (20 years) - $188,000, and
  • Machinery and equipment (8 years) - $216,000.
  • Previously unrecorded patent recognized at acquisition (10 years) - $72,000

During 20x1, Jackson reported net income of $96,000 while paying dividends of $12,000. During 20x2, Jackson reported net income of $132,000 while paying dividends of $36,000.

Required

  1. Record Mt. Holly Inc.s acquisition of Laurelton Corporation at 1/1/20x1.
  2. Prepare a schedule showing the amount of purchase price allocated to non-current assets, including periodic depreciation/amortizations of the related purchase price adjustments.
  3. Determine the amount of goodwill recorded at acquisition, if any.
  4. Prepare the consolidation worksheet journal entries for fiscal year-ending 20x1.
  5. Prepare the consolidating worksheet journal entries for fiscal year-ending 20x2.

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