Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Pullman, Inc. acquired a controlling interest in Sierra Company on 1/1/20x1. At that time, the book value of Sierra Companys net assets was $16,970,000, including

Pullman, Inc. acquired a controlling interest in Sierra Company on 1/1/20x1. At that time, the book value of Sierra Companys net assets was $16,970,000, including the following:

Fair Value

Book Value

Book Value

Fair Value

Remaining Life

Buildings

$2,700,000

$3,400,000

7 years

Equipment

3,700,000

3,300,000

5 years

Land

1,700,000

2,550,000

indefinite

In acquiring their controlling interest, Pullman paid $10,450,000 cash in exchange for 55% of the outstanding voting common stock of Sierra. At the time of the acquisition, the fair value of 100% of Sierras outstanding common stock was $19,000,000. Pullman did not pay a control premium to acquire their 55% controlling interest.

Any consideration paid in excess of the fair value of net assets acquired is assigned to goodwill.

The account balances for Pullman, Inc. and Sierra Company at 12/31/20x1 are as follows:

Pullman, Inc.

Sierra Company

Revenues

(298,000,000)

(103,750,000)

Expenses

271,000,000

95,800,000

Equity in income of Sierra Company

(4,361,500)

0

Net income

(31,361,500)

(7,950,000)

Retained earnings, January 1, 20x1

(2,500,000)

(100,000)

Net income (above)

(31,361,500)

(7,950,000)

Dividends paid

5,000,000

3,000,000

Retained earnings, December 31, 20x1

(28,861,500)

(5,050,000)

Current Assets

30,500,000

20,800,000

Investment in Sierra Company

13,161,500

Land

1,500,000

1,700,000

Buildings

5,600,000

2,360,000

Equipment (net)

3,100,000

2,960,000

Total assets

53,861,500

27,820,000

Accounts payable

(3,100,000)

(4,900,000)

Notes payable

(1,000,000)

Common stock

(2,900,000)

(6,000,000)

Additional paid-in capital

(19,000,000)

(10,870,000)

Retained earnings, Dec. 31, 20x1 (above)

(28,861,500)

(5,050,000)

Total liabilities and stockholders equity

(53,861,500)

(27,820,000)

Required

  1. Prepare the journal entry to record Pullmans acquisition of Sierra Company.
  2. Prepare a schedule showing the determination of goodwill, if applicable, for this acquisition.
  3. Prepare a schedule showing the allocation of any related purchase price adjustments to the acquired companys assets, including the related annual amortizations, if applicable.
  4. For 12/31/20x1, prepare a consolidation worksheet for this transaction. Assume that no goodwill impairment adjustment is required. (For the format, consider the Exhibit 4.6 on page 167 & use Excel)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

The Politics Of Internal Auditing

Authors: Dr. Larry Rittenberg, Patty Miller

1st Edition

0894139053, 978-0894139055

More Books

Students also viewed these Accounting questions

Question

=+ (d) Show that Y ,, Y2, ... are independent.

Answered: 1 week ago

Question

You have

Answered: 1 week ago