Eliminating Entries, Bargain Gain Phelps, Inc. acquires all of the stock of Skelton Company by issuing 1 million shares of its capital stock with a fair value of $18/share. At the date of acquisition, Skelton's current assets had a book value of $5 million and a fair value of $4 million, its noncurrent assets had a book value of $45 million and a fair value of $25 million, and its liabilities had a book value of $20 million, which approximated fair value. Skelton also has previously unreported identifiable intangibles, valued at $12 million, that meet ASC Topic 805's criteria for recognition. Skelton's shareholders' equity consists of capital stock of $38 million and a retained loss of $8 million (debit balance). Required a. Calculate the gain on acquisition and prepare Phelps' journal entry to record the acquisition on its own books. Enter answers in millions. Description ♦ + Description + Debit b. Prepare the eliminating entries necessary to consolidate the balance sheet accounts of Phelps and Skelton at the date of acquisition. Enter answers in millions. Ref Credit Debit Credit

Eliminating Entries, Bargain Gain Phelps, Inc. acquires all of the stock of Skelton Company by issuing 1 million shares of its capital stock with a fair value of $18/share. At the date of acquisition, Skelton's current assets had a book value of $5 million and a fair value of $4 million, its noncurrent assets had a book value of $45 million and a fair value of $25 million, and its liabilities had a book value of $20 million, which approximated fair value. Skelton also has previously unreported identifiable intangibles, valued at $12 million, that meet ASC Topic 805's criteria for recognition. Skelton's shareholders' equity consists of capital stock of $38 million and a retained loss of $8 million (debit balance). Required a. Calculate the gain on acquisition and prepare Phelps' journal entry to record the acquisition on its own books. Enter answers in millions. Description ♦ + Description + Debit b. Prepare the eliminating entries necessary to consolidate the balance sheet accounts of Phelps and Skelton at the date of acquisition. Enter answers in millions. Ref Credit Debit Credit

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Eliminating Entries, Bargain Gain
Phelps, Inc. acquires all of the stock of Skelton Company by issuing 1 million shares of its capital stock with a fair value of $18/share. At the date of acquisition, Skelton's current
assets had a book value of $5 million and a fair value of $4 million, its noncurrent assets had a book value of $45 million and a fair value of $25 million, and its liabilities had a
book value of $20 million, which approximated fair value. Skelton also has previously unreported identifiable intangibles, valued at $12 million, that meet ASC Topic 805's criteria
for recognition. Skelton's shareholders' equity consists of capital stock of $38 million and a retained loss of $8 million (debit balance).
Required
a. Calculate the gain on acquisition and prepare Phelps' journal entry to record the acquisition on its own books.
Enter answers in millions.
Description
Ref.
(E)
♦
+
+
b. Prepare the eliminating entries necessary to consolidate the balance sheet accounts of Phelps and Skelton at the date of acquisition.
Enter answers in millions.
Description
Investment in Skelton
(R) Identifiable intangibles
Noncurrent assets
+
♦
Debit
+
+
Credit
Debit
Credit

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