Problem 3 40 points) At 1/1/20x1, Penske, Inc. acquired 6,500 shares of the outstanding voting common stock of Stanza Company for $100 per share, paying cash. Penske, Inc. applies the equity method to account for their investment in Stanza. The remaining 3,500 share, which had a market value of $95 per share, were held by other investors unrelated to Penske, Inc. At the acquisition date, the book value of Stanza Company's net assets were $672,000. The recorded value of Stanza's shareholder's equity was: Common stock Retained earnings Net book value $420,000 252.000 $672,000 There have been no changes in Stanza's common stock account since the acquisition. The book value and fair value of Stanza's assets and liabilities were equivalent to their values, except for Stanza's production facility and an unrecorded intangible. The related fair value adjustment information for those are: Fair Value Adjustment Information Useful FV Adjustment Life Production facility $28,000 Unrecorded intangible 80,000 20 years Total $108.000 10 years Annual Amortization $2,800 4,000 56.800 During fiscal year 20x1 and 20x2, Stanza Company generated net income of $105,000 and $104,000, respectively, and declared and paid dividends of $45,000 and $50,000, respectively. Required A. Prepare a schedule showing the computation of goodwill, if any, related to Penske's acquisition of Stanza Company. B. Show the allocation of the identified goodwill, if any, to Penske, Inc. and to the non-controlling interests. C. Prepare the worksheet consolidation entries for the Penske, Inc. and Stanza Company consolidated financial statements at 12/31/20x1. Problem 3 40 points) At 1/1/20x1, Penske, Inc. acquired 6,500 shares of the outstanding voting common stock of Stanza Company for $100 per share, paying cash. Penske, Inc. applies the equity method to account for their investment in Stanza. The remaining 3,500 share, which had a market value of $95 per share, were held by other investors unrelated to Penske, Inc. At the acquisition date, the book value of Stanza Company's net assets were $672,000. The recorded value of Stanza's shareholder's equity was: Common stock Retained earnings Net book value $420,000 252.000 $672,000 There have been no changes in Stanza's common stock account since the acquisition. The book value and fair value of Stanza's assets and liabilities were equivalent to their values, except for Stanza's production facility and an unrecorded intangible. The related fair value adjustment information for those are: Fair Value Adjustment Information Useful FV Adjustment Life Production facility $28,000 Unrecorded intangible 80,000 20 years Total $108.000 10 years Annual Amortization $2,800 4,000 56.800 During fiscal year 20x1 and 20x2, Stanza Company generated net income of $105,000 and $104,000, respectively, and declared and paid dividends of $45,000 and $50,000, respectively. Required A. Prepare a schedule showing the computation of goodwill, if any, related to Penske's acquisition of Stanza Company. B. Show the allocation of the identified goodwill, if any, to Penske, Inc. and to the non-controlling interests. C. Prepare the worksheet consolidation entries for the Penske, Inc. and Stanza Company consolidated financial statements at 12/31/20x1
