Problem 3 Consolidation Year 1(Please show your work)

Paul Company acquires all of the voting stock of Simon Co. on January 1, 2018 at an acquisition cost of $20,300,000 in cash. Simons balance sheet at the date of acquisition is as follows:

(in thousands)	Book Value	Fair Value
	Dr (Cr)	Dr (Cr)
Cash	100,000	100,000
Accounts Receivable	200,000	200,000
Inventory	100,000	100,000
Plant & equipment	6,000,000	7,000,000
Accumulated Depreciation	(1,000,000)
Patents	0	5,000,000
Current liabilities	(300,000)	(300,000)
Long-term liabilities	(1,400,000)	(1,500,000)
Common stock	(2,500,000)
Retained earnings	(1,200,000)
Total	0

As of January 1, 2018, the revaluations have the following estimated lives (all straight-line):

Plant & equipment	20 years
Patents	10 years
Goodwill	Impairment in 2018: $500,000
Long-term liabilities	5 years

Paul uses the equity method to account for its investment in Simon on its own books. The December 31, 2018 trial balances for Paul and Simon appear in the consolidation working paper provided on the next page.

1. Prepare a schedule showing the calculation of Goodwill at acquisition date (January 1, 2018).
2. Present consolidation eliminating entries to consolidate the December 31, 2018 financial statements of the parent and subsidiary.