Porwal Parts acquires all the voting stock of Stonegate Supplies
for $40 million. Stonegate's book value was $10 million at the date
of acquisition. Stonegate's assets and liabilities are carried at
amounts approximating fair value, but it has previously
unrecognized brand names valued at $8,000,000.
Consolidation eliminating entry (R), at the date of acquisition,
includes a(n):
| A. |
$32 million debit to goodwill |
|
| B. |
$10 million debit to Stonegate's equity accounts |
|
| C. |
$40 million credit to the investment account |
|
| D. |
$8 million debit to identifiable intangible assets |
| Fair value of Net assets | $10,000,000 | |
| Add: Brand value | $8,000,000 | |
| $18,000,000 | ||
| Purchase consideration | $40,000,000 | |
| Goodwill | $22,000,000 | |
| Journal entry | Debit | Credit |
| Net assets | $10,000,000 | |
| identifiable intangible assets | $8,000,000 | |
| Goodwill | $22,000,000 | |
| Cash | $40,000,000 | |
| Hence, option (D) is correct. | ||
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Porwal Parts acquires all the voting stock of Stonegate Supplies for $40 million. Stonegate's book value...
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