On January 1, 2018, Pearson Company acquired all of Sundisk Company's voting stock for $20,000 in cash. Sundisk's total shareholders' equity at January 1, 2018 was $5,000. Some of Sundisk's assets and liabilities at the date of acquisition had fair values that were different from reported values, as follows: Book Value Fair Value Plant assets, net (10 years, straight-line) $15,000 $ 10,000 Identifiable intangibles (indefinite life) 0 9,000 It is now December 31, 2020 (3 years later). Impairment of recognized identifiable intangibles totals $400 for 2018 and 2019, and there is no impairment in 2020. There is no goodwill impairment as of the beginning of 2020, but goodwill impairment for 2020 is $1,200. Pearson uses the complete equity method to account for its investment. December 31, 2020 trial balances for Pearson and Sundisk follow: Pearson Sundisk Dr (Cr) Dr (Cr) Current assets $ 5,000 $ 2,500 Plant assets, net 28,700 22,000 Identifiable intangibles Investment in Sundisk 28,400 Goodwill Liabilities Capital stock Retained earnings, beginning Sales revenue Equity in net income of Sundisk Cost of goods sold Operating expenses (20,300) (15,000) (25,000) (25,000) (800) 20,000 4,000 (11,000) (2,000) (10,000) (14,000) 9,000 3,500 $ 0 $ 0 The following relates to consolidation eliminating entries for 2020. Assume Pearson uses the cost method to account for its investment in Sundisk. You are doing consolidation eliminating entries at December 31, 2020. Before doing eliminating entries (C), (E), (R), (O), in eliminating entry (A) you must increase Pearson's Investment in Sundisk by: Select one: o A. $5,600 O B. $7,600 O C. $8,000 D. $7,000 On January 1, 2018, Pearson Company acquired all of Sundisk Company's voting stock for $20,000 in cash. Sundisk's total shareholders' equity at January 1, 2018 was $5,000. Some of Sundisk's assets and liabilities at the date of acquisition had fair values that were different from reported values, as follows: Book Value Fair Value Plant assets, net (10 years, straight-line) $15,000 $ 10,000 Identifiable intangibles (indefinite life) 0 9,000 It is now December 31, 2020 (3 years later). Impairment of recognized identifiable intangibles totals $400 for 2018 and 2019, and there is no impairment in 2020. There is no goodwill impairment as of the beginning of 2020, but goodwill impairment for 2020 is $1,200. Pearson uses the complete equity method to account for its investment. December 31, 2020 trial balances for Pearson and Sundisk follow: Pearson Sundisk Dr (Cr) Dr (Cr) Current assets $ 5,000 $ 2,500 Plant assets, net 28,700 22,000 Identifiable intangibles Investment in Sundisk 28,400 Goodwill Liabilities Capital stock Retained earnings, beginning Sales revenue Equity in net income of Sundisk Cost of goods sold Operating expenses (20,300) (15,000) (25,000) (25,000) (800) 20,000 4,000 (11,000) (2,000) (10,000) (14,000) 9,000 3,500 $ 0 $ 0 The following relates to consolidation eliminating entries for 2020. Assume Pearson uses the cost method to account for its investment in Sundisk. You are doing consolidation eliminating entries at December 31, 2020. Before doing eliminating entries (C), (E), (R), (O), in eliminating entry (A) you must increase Pearson's Investment in Sundisk by: Select one: o A. $5,600 O B. $7,600 O C. $8,000 D. $7,000
