On 1/1/21 Playtel Corporation acquired all of the stock of Sydney Corporation for $800,000 cash. The equity accounts of Sydney were as follows on the date of acquisition; Common stock 60,000 Paid in capital in excess of par value 40,000 Retained earnings 50,000 The book value of Sydney’s identifiable assets equaled their fair values, except for a patent that fair value exceeded its book value by $50,000. The patent is being amortized over 5 years. For the year ended 12/31/21 Sydney reported a net income of $85,000 and on 12/31/21 paid dividends of $20,000. During 2020 any recognized Goodwill was impaired by $5,000. Required; 1. Calculate the amount of Goodwill to be recognized at the date of acquisition. 2. Calculate the Equity in Net Income of Sydney to be reported on Playtel’s books. 3. Prepare the following journal entries on Playtel’s books; a. To record the 1/1/21 acquisition of Sydney by Playtel b. To record the 12/31/21 payment of dividends by Sydney to Playtel c. To record on 12/31/21 Playtel’s Equity in Net Income of Sydney 4. Prepare the 12/31/21 eliminating entries necessary to consolidate Playtel Company and Sydney Company.
On 1/1/21 Playtel Corporation acquired all of the stock of Sydney Corporation for $800,000 cash. The
equity accounts of Sydney were as follows on the date of acquisition;
Common stock 60,000
Paid in capital in excess of par value 40,000
The book value of Sydney’s identifiable assets equaled their fair values, except for a patent that fair
value exceeded its book value by $50,000. The patent is being amortized over 5 years. For the year
ended 12/31/21 Sydney reported a net income of $85,000 and on 12/31/21 paid dividends of $20,000.
During 2020 any recognized
Required;
1. Calculate the amount of Goodwill to be recognized at the date of acquisition.
2. Calculate the Equity in Net Income of Sydney to be reported on Playtel’s books.
3. Prepare the following
a. To record the 1/1/21 acquisition of Sydney by Playtel
b. To record the 12/31/21 payment of dividends by Sydney to Playtel
c. To record on 12/31/21 Playtel’s Equity in Net Income of Sydney
4. Prepare the 12/31/21 eliminating entries necessary to consolidate Playtel Company and Sydney
Company.
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