Pinnacle Corporation acquired all of Stengl Corporation's common stock by issuing 350,000 shares of $1 par common stock with a current market value of $8,000,000. Related accountants' and attorneys' fees were $300,000, paid in cash. The total book value of Stengl's shareholders' equity consists of capital stock of $160,000 and retained earnings of $1,440,000. Book values and fair values of Stengl's assets and liabilities are given below:
Book Value | Fair Value | |
---|---|---|
Cash and receivables | $640,000 | $640,000 |
Inventories | 880,000 | 720,000 |
Plant assets, net | 1,280,000 | 800,000 |
Current liabilities | (800,000) | (800,000) |
Long-term debt | (400,000) | (380,000) |
Totals | $1,600,000 | $980,000 |
In addition, Stengl has previously unrecorded identifiable intangible assets with a fair value of $960,000 that meet ASC 805 criteria for recognition.
Required
(a) Prepare the entry Pinnacle makes to record the acquisition on its own books.
Enter numerical answers using all zeros (do not abbreviate to thousands or millions).
General Journal | ||
---|---|---|
Description | Debit | Credit |
Investment in Stengl | Answer | Answer |
AnswerMerger expensesCashGoodwillEquity in net income of StenglRetained earningsEarnout liability | Answer | Answer |
Common stock | Answer | Answer |
Additional paid-in capital | Answer | Answer |
AnswerMerger expensesCashGoodwillEquity in net income of StenglRetained earningsEarnout liability | Answer | Answer |
(b) Prepare the working paper eliminating entries to consolidate
the balance sheets of Pinnacle Corporation and Stengl Corporation
at the date of acquisition.
Enter numerical answers using all zeros (do not abbreviate to thousands or millions).
ConsolidationJournal | ||
---|---|---|
Description | Debit | Credit |
(E) | ||
Capital stock | Answer | Answer |
AnswerRetained earningsInvestment in StenglGoodwillGain on purchaseEquity in net income of StenglCapital stockCash | Answer | Answer |
AnswerRetained earningsInvestment in StenglGoodwillGain on purchaseEquity in net income of StenglCapital stockCash | Answer | Answer |
(R) | ||
Long-term debt | Answer | Answer |
Identifiable intangible assets | Answer | Answer |
AnswerRetained earningsInvestment in StenglGoodwillGain on purchaseEquity in net income of StenglCapital stockCash | Answer | Answer |
Plant assets, net | Answer | Answer |
Inventories | Answer | Answer |
AnswerRetained earningsInvestment in StenglGoodwillGain on purchaseEquity in net income of StenglCapital stockCash | Answer | Answer |
a) Journal Entry to Record Acquisition
Date | Accounts Titles and Explanation | Debit | Credit |
Investment in Stegl | $8,000,000 | ||
Merger Expenses | $300,000 | ||
Common Stock | $350,000 |
Additional Capital ($8,000,000-$350,000) | $7,650,000 | ||
Cash | $300,000 |
(b) Working Paper Eliminating Entries
E)
Date | Accounts Titles and Explanation | Debit | Credit |
Capitlal Stock | $160,000 | ||
Retained Earnings | $1,440,000 | ||
Investment in Stegl | $1,600,000 |
R)
Date | Accounts Titles and Explanation | Debit | Credit |
Long-term debt (400,000 - 380,000) | $20,000 | ||
Identifiable intangible assets | $960,000 | ||
Goodwill (Balancing figure) | $6,060,000 | ||
Plant assets (1,280,000 - 800,000) | $480,000 | ||
Inventories ( 880,000- 720,000) | $160,000 | ||
Investment in Stengl ( $8,000,000 -$1,600,000) | $6,400,000 | ||
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Pinnacle Corporation acquired all of Stengl Corporation's common stock by issuing 350,000 shares of $1 par...
Pinnacle Corporation acquired all of Stengl Corporation's common stock by issuing 350,000 shares of $1 par common stock with a current market value of $8,000,000. Related accountants' and attorneys' fees were $300,000, paid in cash. The total book value of Stengl's shareholders' equity consists of capital stock of $160,000 and retained earnings of $1,440,000. Book values and fair values of Stengl's assets and liabilities are given below: Book Value Fair Value Cash and receivables $640,000 $640,000 Inventories 880,000 720,000 Plant...
Pinnacle Corporation acquired all of Stengl Corporation's common stock by issuing 350,000 shares of $1 par common stock with a current market value of $8,000,000. Related accountants' and attorneys' fees were $300,000, paid in cash. The total book value of Stengl's shareholders' equity consists of capital stock of $160,000 and retained earnings of $1,440,000. Book values and fair values of Stengl's assets and liabilities are given below: Book Value Fair Value Cash and receivables $640,000 $640,000 Inventories 880,000 720,000 Plant...
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