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On January 1, 2020, Playtel Inc. acquired all of the stock of San Jose Cable for $250 million in cash. At the date of acquisition, Playtel's shareholders' equity accounts were as follows (in thousands): Common stock, $1 par $5,000 Additional paid-in capital 25,000 Retained deficit (1,000) Treasury stock (800) Total $28,200 Both companies have a December 31 year-end. At the date of acquisition, San Jose's reported net assets had book values approximating fair value. However, it had previously unreported indefinite-life identifiable intangibles valued at $50 million, meeting ASC Topic 805 requirements for capitalization. Impairment losses in 2020 for identifiable intangibles were $1 million. Goodwill from this acquisition was not impaired in 2020. San Jose reported a net income of $4 million in 2020 and paid no dividends. Playtel uses the complete equity method to report its investment in San Jose on its own books. Required: a. Calculate the original amount of goodwill for this acquisition. b. Calculate equity in net income of San Jose reported on Playtel's books in 2020.

On January 1, 2020, Playtel Inc. acquired all of the stock of San Jose Cable for $250 million in cash. At the date of acquisition, Playtel's shareholders' equity accounts were as follows (in thousands): Common stock, $1 par $5,000 Additional paid-in capital 25,000 Retained deficit (1,000) Treasury stock (800) Total $28,200 Both companies have a December 31 year-end. At the date of acquisition, San Jose's reported net assets had book values approximating fair value. However, it had previously unreported indefinite-life identifiable intangibles valued at $50 million, meeting ASC Topic 805 requirements for capitalization. Impairment losses in 2020 for identifiable intangibles were $1 million. Goodwill from this acquisition was not impaired in 2020. San Jose reported a net income of $4 million in 2020 and paid no dividends. Playtel uses the complete equity method to report its investment in San Jose on its own books. Required: a. Calculate the original amount of goodwill for this acquisition. b. Calculate equity in net income of San Jose reported on Playtel's books in 2020.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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On january. ..please given answer Accounting

On January 1, 2020, Playtel Inc. acquired all of the stock of San Jose Cable for $250 million in cash. At the date of acquisition, Playtel's shareholders' equity accounts were as follows (in thousands): Common stock, $1 par $5,000 Additional paid-in capital 25,000 Retained deficit (1,000) Treasury stock (800) Total $28,200 Both companies have a December 31 year-end. At the date of acquisition, San Jose's reported net assets had book values approximating fair value. However, it had previously unreported indefinite-life identifiable intangibles valued at $50 million, meeting ASC Topic 805 requirements for capitalization. Impairment losses in 2020 for identifiable intangibles were $1 million. Goodwill from this acquisition was not impaired in 2020. San Jose reported a net income of $4 million in 2020 and paid no dividends. Playtel uses the complete equity method to report its investment in San Jose on its own books. Required: a. Calculate the original amount of goodwill for this acquisition. b. Calculate equity in net income of San Jose reported on Playtel's books in 2020.
Transcribed Image Text:On January 1, 2020, Playtel Inc. acquired all of the stock of San Jose Cable for $250 million in cash. At the date of acquisition, Playtel's shareholders' equity accounts were as follows (in thousands): Common stock, $1 par $5,000 Additional paid-in capital 25,000 Retained deficit (1,000) Treasury stock (800) Total $28,200 Both companies have a December 31 year-end. At the date of acquisition, San Jose's reported net assets had book values approximating fair value. However, it had previously unreported indefinite-life identifiable intangibles valued at $50 million, meeting ASC Topic 805 requirements for capitalization. Impairment losses in 2020 for identifiable intangibles were $1 million. Goodwill from this acquisition was not impaired in 2020. San Jose reported a net income of $4 million in 2020 and paid no dividends. Playtel uses the complete equity method to report its investment in San Jose on its own books. Required: a. Calculate the original amount of goodwill for this acquisition. b. Calculate equity in net income of San Jose reported on Playtel's books in 2020.
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