Photec Corporation acquires the voting stock of Solarcentury Inc. on January 1, 2020. In preparing to consolidate the trial balances of Photec and Solarcentury at December 31, 2021 (two years after the acquisition), you assemble the following information:

Date-of-acquisition information:

1. Value of stock issued to Solarcentury shareholders: $99,000.

2. Direct merger costs: $800 and stock registration fees, $350, all paid in cash.

3. Solarcentury shareholders equity: $23,500, consisting of capital stock, $5,000; retained earnings, $18,000; accumulated other comprehensive income, $500.

4. Fair value of previously unrecorded identifiable intangibles (5-year life): $25,000. There are no revaluations of Solarcenturys reported net assets.

Information for 2020 and 2021:

5. Solarcenturys reported net income for 2020: $8,000; for 2021: $6,500.

6. Solarcenturys reported other comprehensive income for 2020: $75 gain; for 2021: $125 loss.

7. Solarcentury declared and paid dividends of $300 each year.

8. Goodwill and identifiable intangibles are not impaired in 2020; goodwill is impaired by $700 in 2021.

A. Amort. exp F. Equity in OCI/OCL K. Merger exp.

B. Capital stock G. Goodwill

C. Cash H. Good impair. loss

D. Dividends I. Identifiable intangibles

E. Equity in net inc. J. Invest. in. Solarcentury

Required

a. Prepare the 2020 journal entries made by Photec to record its investment, using the complete equity method. Use the capital letters above and list the debit letters and amounts first.

b. Prepare the consolidation eliminating entries (Skip Entry E, Equity) made at December 31, 2021. The equity in net income was $800 for 2021.

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Photec Corporation acquires the voting stock of Solarcentury Inc. on January 1, 2020. In preparing to consolidate the trial balances of Photec and Solarcentury at December 31, 2021 (two years after the acquisition), you assemble the following information:

Date-of-acquisition information:

1. Value of stock issued to Solarcentury shareholders: $99,000.

2. Direct merger costs: $800 and stock registration fees, $350, all paid in cash.

3. Solarcentury shareholders equity: $23,500, consisting of capital stock, $5,000; retained earnings, $18,000; accumulated other comprehensive income, $500.

4. Fair value of previously unrecorded identifiable intangibles (5-year life): $25,000. There are no revaluations of Solarcenturys reported net assets.

Information for 2020 and 2021:

5. Solarcenturys reported net income for 2020: $8,000; for 2021: $6,500.

6. Solarcenturys reported other comprehensive income for 2020: $75 gain; for 2021: $125 loss.

7. Solarcentury declared and paid dividends of $300 each year.

8. Goodwill and identifiable intangibles are not impaired in 2020; goodwill is impaired by $700 in 2021.

A. Amort. exp F. Equity in OCI/OCL K. Merger exp.

B. Capital stock G. Goodwill

C. Cash H. Good impair. loss

D. Dividends I. Identifiable intangibles

E. Equity in net inc. J. Invest. in. Solarcentury

Required

a. Prepare the 2020 journal entries made by Photec to record its investment, using the complete equity method. Use the capital letters above and list the debit letters and amounts first.

b. Prepare the consolidation eliminating entries (Skip Entry E, Equity) made at December 31, 2021. The equity in net income was $800 for 2021.