Question

Following are selected account balances from Penske Company and Stanza Corporation as of December 31, 2018:

Stanza (500,000) 125,000 344,000 Revenues Cost of goods sold Depreciation expense Investment income Dividends declared Retained earnings, 1/1/18 Current assets Copyrights Royalty agreements Investment in Stanza Liabilities Common stock Additional paid-in capital Penske (834,000) 296,900 235,000 Not given 80,000 (746,000) 594,000 1,074,000 644,000 Not given (544,000) (600,000) ($20 par) (150,000) 60,000 (314,000) 688,000 436,000 1,188,000 (1,747,000) (200,000) ($10 par) (80,000) Note: Parentheses indicate a credit balance.

On January 1, 2018, Penske acquired all of Stanza’s outstanding stock for $816,000 fair value in cash and common stock. Penske also paid $10,000 in stock issuance costs. At the date of acquisition copyrights (with a six-year remaining life) have a $516,000 book value but a fair value of $600,000.

1. As of December 31, 2018, what is the consolidated copyrights balance?

2. For the year ending December 31, 2018, what is consolidated net income?

3. As of December 31, 2018, what is the consolidated retained earnings balance?

4. As of December 31, 2018, what is the consolidated balance to be reported for goodwill?

Answer 1

23 As of December 31, 2018, what is the consolidated copyrights balance? 24 Fair Value of Copyrights 25 600,000 Less Book Value of Copyrights (516,000) 26 Allocation of Copyrights ( A) 27 84,000 Number of Years of Life remaining ( B) 28 Excess Amortizations ,2018 14,000 29 30 Penske Book Value of copyrights 31 1,074,000 Stanza Book Value of Copyright 32 436,000 Add Allocation of Copyright 33 84,000 (14,000) 34 Less Excess Amortization Consolidated Copyright Balance 35 1,580,000 36 37 For the year ending December 31, 2018, what is consolidated net income? 38 Consolidated Revenues (834000+500000) Less Consolidated Expenses 39 1,334,000 1,000,900 (296900+125000+235000+344000) 40 14,000 41 Excess Amortization Total Expenses 42 1,014,900 Consolidated Net Income 43 319,100 44

45 As of December 31, 2018, what is the consolidated retained earnings balance? 46 Retained Earnings of Penske as on 1/1/18 47 746,000 Add Net Income 48 319,100 Less dividend declared (80,000) 49 Consolidated Retained Earnings as on 12/31/18 985,100 50 51 52 As of December 31, 2018, what is the consolidated balance to be reported for goodwill? 53 Fair Value of Stanza acquisitin 54 816,000 Less Book Value of Stanza 55 Beginning Retained Earnings 56 314,000 Common Stock 57 200,000 Additional Pad In Capital 58 80,000 594,000 Fair Value in excess of Book Value 59 222,000 Less Excess Fair Value allocated to Copyrights (84,000) 60 Goodwill 61 138,000 62