Polaris Company acquires all of the stock of SSC, Inc. for $100 million in cash. At the date of acquisition, SSC's equity consists of capital stock of $25 million, retained earnings of $40 million (credit balance), and accumulated other comprehensive income of $5 million (credit balance). SSC's books report current assets of $20 million, equipment of $150 million, and liabilities of $100 million. Stark's assets and liabilities are reported on its books at amounts that approximate fair value, except that equipment with a book value of $20 million has a fair value of $30 million. Stark has no previously unreported identifiable intangible assets. Required Note: Provide all answers in millions. Note: Do not use negative signs. a. Prepare a schedule calculating the goodwill to be recognized for this acquisition. Acquisition cost $ 100✓ SSC's book value 70 ✓ 30 30 Excess of acquisition cost over book value $ Excess of fair value over book value: Equipment Goodwill (E) Additional Paid-in-Capital Retained earnings Capital stock $ b. Prepare working paper eliminating entries (E) and (R) to consolidate the balance sheet accounts of Polaris and SSC at the date of acquisition. Debit Credit (R) Goodwill ✓ Identifiable intangible accote 10 ✓ 20 Equipment To eliminate SSC's equity accounts against the investment account 23 40 25 C 0 20 10 0x 0✔ 0✔ 145 x 0✔ Ox
Polaris Company acquires all of the stock of SSC, Inc. for $100 million in cash. At the date of acquisition, SSC's equity consists of capital stock of $25 million, retained earnings of $40 million (credit balance), and accumulated other comprehensive income of $5 million (credit balance). SSC's books report current assets of $20 million, equipment of $150 million, and liabilities of $100 million. Stark's assets and liabilities are reported on its books at amounts that approximate fair value, except that equipment with a book value of $20 million has a fair value of $30 million. Stark has no previously unreported identifiable intangible assets. Required Note: Provide all answers in millions. Note: Do not use negative signs. a. Prepare a schedule calculating the goodwill to be recognized for this acquisition. Acquisition cost $ 100✓ SSC's book value 70 ✓ 30 30 Excess of acquisition cost over book value $ Excess of fair value over book value: Equipment Goodwill (E) Additional Paid-in-Capital Retained earnings Capital stock $ b. Prepare working paper eliminating entries (E) and (R) to consolidate the balance sheet accounts of Polaris and SSC at the date of acquisition. Debit Credit (R) Goodwill ✓ Identifiable intangible accote 10 ✓ 20 Equipment To eliminate SSC's equity accounts against the investment account 23 40 25 C 0 20 10 0x 0✔ 0✔ 145 x 0✔ Ox
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Polaris Company acquires all of the stock of SSC, Inc. for $100 million in cash. At the date of acquisition, SSC's equity consists of capital stock of $25 million, retained earnings of $40 million (credit balance), and accumulated
other comprehensive income of $5 million (credit balance). SSC's books report current assets of $20 million, equipment of $150 million, and liabilities of $100 million. Stark's assets and liabilities are reported on its books at
amounts that approximate fair value, except that equipment with a book value of $20 million has a fair value of $30 million. Stark has no previously unreported identifiable intangible assets.
Required
Note: Provide all answers in millions.
Note: Do not use negative signs.
a. Prepare a schedule calculating the goodwill to be recognized for this acquisition.
Acquisition cost
$
100 ✓
70 ✓
SSC's book value
Excess of acquisition cost over book value $
30 ✓
Excess of fair value over book value:
Equipment
Goodwill
(E) Additional Paid-in-Capital
Retained earnings
Capital stock
b. Prepare working paper eliminating entries (E) and (R) to consolidate the balance sheet accounts of Polaris and SSC at the date of acquisition.
Debit
Credit
$
(R) Goodwill
10 ✓
20✓
Identifiable intangible assets
Investment in SSC
CCC
Equipment
To eliminate SSC's equity accounts against the investment account
V
bilinius au fi lux
23
40
25
0
20
10
0
0x
0✔
0✔
145 x
0✔
0x
30 ✔
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