Parmelot purchased Spamalot on January 1, 2020, for $5,000,000. On the day of the acquisition Spamlot had Retained Earnings of $1,700,000, Common Stock of $1,300,000 and Additional Paid in Capital of $600,000. The book value of Spamalot’s assets and liabilities equaled their current value on that day except for a Building that had a book value of $1,000,000 and a current value of $1,400,000 on that day and a 10-year remaining life. Required: 1) Prepare the elimination entry necessary to prepare the consolidated financial statements as of January 1, 2020 (the day of acquisition). 2) Prepare the elimination entries necessary to prepare the consolidated financial statements one year later (on December 31, 2020), assuming that Spamalot earned $90,000 for the year. 3) Assume that on January 1, 2021, $300,000 of the Goodwill is determined to be impaired. Prepare the necessary journal entry to write this off by the Parent.
Parmelot purchased Spamalot on January 1, 2020, for $5,000,000. On the day of the acquisition Spamlot had
The book value of Spamalot’s assets and liabilities equaled their current value on that day except for a Building that had a book value of $1,000,000 and a current value of $1,400,000 on that day and a 10-year remaining life.
Required:
1) Prepare the elimination entry necessary to prepare the consolidated financial statements as of January 1, 2020 (the day of acquisition).
2) Prepare the elimination entries necessary to prepare the consolidated financial statements one year later (on December 31, 2020), assuming that Spamalot earned $90,000 for the year.
3) Assume that on January 1, 2021, $300,000 of the
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