Power Corporation acquired 100 percent ownership of Scrub Company on February 12, 20X9. At the date...

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Power Corporation acquired 100 percent ownership of Scrub Company on February 12, 20X9. At the date of acquisition, Scrub Com

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Answer 1

Answer #1

Computation of goodwill:

Total investment made	275000
Less: Common stock	99000
Retained earnings	151000
Land Appreciation	17000
Inventory (depreciation)	(6000)
So, Goodwill	14000

Journal Entries will be:

12 feb 20x9	Retained Earnings a/c Dr	151000
	Common stock a/c Dr	99000
	To Investment in Scrub Company a/c		250000

	Land a/c Dr	17000
	Goodwill a/c Dr	14000
	To Inventory a/c		6000
	To Investment in Scrub Company a/c (275000-250000)		25000

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Answer 2

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