Pilgrim Corporation acquires all of the stock of Sonic Company for $5,000,000 in cash. Sonic's net...

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Pilgrim Corporation acquires all of the stock of Sonic Company for $5,000,000 in cash. Sonic's net...

Pilgrim Corporation acquires all of the stock of Sonic Company for $5,000,000 in cash. Sonic's net assets had a book value of $3,000,000 at the date of acquisition. The book values of Sonic's assets and liabilities approximated fair values, except that Sonic reported inventories at $900,000 more than fair value and plant assets at $2,000,000 more than fair value. In addition, Sonic had unrecorded identifiable intangible assets with an estimated fair value of $5,000,000, appropriately capitalized according to GAAP.

Consolidation working paper eliminating entry (E) at the date of acquisition includes a credit to Investment in Sonic in the amount of:

A.
$5,000,000

B.
$7,900,000

C.
$3,000,000

D.
$2,100,000

business accounting

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Answer 1

Answer #1

Solution: 300,000

Working:

Eliminating entry (E):

Dr. Stockholders’ Equity - Sonic $300,000

Cr. Investment in Sonic $300,000

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Answer 2

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