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