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Pinnacle Corporation acquired all of Stengl Corporation's common stock by issuing 500,000 shares of $1 par common stock with a current market value of $16,000,000.

Pinnacle Corporation acquired all of Stengl Corporation's common stock by issuing 500,000 shares of $1 par common stock with a current market value of $16,000,000. Related accountants' and attorneys' fees were $300,000, paid in cash. The total book value of Stengl's shareholders' equity consists of capital stock of $320,000 and retained earnings of $2,880,000. Book values and fair values of Stengl's assets and liabilities are given below:

Book Value Fair Value
Cash and receivables $1,280,000 $1,280,000
Inventories 1,760,000 1,440,000
Plant assets, net 2,560,000 1,600,000
Current liabilities (1,600,000) (1,600,000)
Long-term debt (800,000) (760,000)
Totals $3,200,000 $1,960,000

In addition, Stengl has previously unrecorded identifiable intangible assets with a fair value of $1,920,000 that meet ASC 805 criteria for recognition.

Required

(a) Prepare the entry Pinnacle makes to record the acquisition on its own books.

Enter numerical answers using all zeros (do not abbreviate to thousands or millions).

General Journal
Description Debit Credit
Investment in Stengl Answer Answer
AnswerMerger expensesCashGoodwillEquity in net income of StenglRetained earningsEarnout liability Answer Answer
Common stock Answer Answer
Additional paid-in capital Answer Answer
AnswerMerger expensesCashGoodwillEquity in net income of StenglRetained earningsEarnout liability Answer Answer

(b) Prepare the working paper eliminating entries to consolidate the balance sheets of Pinnacle Corporation and Stengl Corporation at the date of acquisition.

Enter numerical answers using all zeros (do not abbreviate to thousands or millions).

ConsolidationJournal
Description Debit Credit
(E)
Capital stock Answer Answer
AnswerRetained earningsInvestment in StenglGoodwillGain on purchaseEquity in net income of StenglCapital stockCash Answer Answer
AnswerRetained earningsInvestment in StenglGoodwillGain on purchaseEquity in net income of StenglCapital stockCash Answer Answer
(R)
Long-term debt Answer Answer
Identifiable intangible assets Answer Answer
AnswerRetained earningsInvestment in StenglGoodwillGain on purchaseEquity in net income of StenglCapital stockCash Answer Answer
Plant assets, net Answer Answer
Inventories Answer Answer
AnswerRetained earningsInvestment in StenglGoodwillGain on purchaseEquity in net income of StenglCapital stockCash Answer Answer

Please answer all parts of the question.

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