Question

An acquisition takes place on January 1, 2018. At December 31, 2018, you observe the following consolidation eliminating entires:

(R) Indentifiable intangibles 3,000,000
Land 2,000,000
Goodwill 15,000,000
   Inventories 500,000
   Property and equipment, net 10,000,000
   Investment in Samson Company 9,500,000

(O) Amortization Expense 600,000
Impairment loss 200,000
   Inventories 500,000
   Property and equipment, net 1,000,000
   Cost of goods sold 500,000
Depreciation expense 1,000,000
   Identifiable intangibles 600,000
   Goodwill 200,000

Property and equipment and identifiable intangibles revaluations are written off on a straight-line basis, no residual value. Additional goodwill impairment losses of $400,000 are reported in 2021. Except for the inventories, none of the revalued assets are sold in future years.

Prepare consolidation eliminating entries (R) and (O) on December 31, 2023.

Answer 1

	Consolidation elimination entries on December 31, 2023
R	Land	$2,000,000
	Goodwill	$14,400,000
	Property and equipment, net		$5,000,000
	Investment in Samson Company		$11,400,000
O	Property and equipment, net	$1,000,000
	Depreciation expense		$1,000,000
	Working Note:
	Identifiable intangibles are amortized over a period of 5 years (3000000/600000),
	Thus in year 2022, it was fully amortized.
	Property and equipment are depreciated over a period of 10 years(10000000/1000000)
	Goodwill	$15,000,000
	Less: Impairment loss in 2018	($200,000)
	Impairment loss in 2021	($400,000)
	Goodwill	$14,400,000