Polaris Company acquires all of the stock of SSC, Inc. for $80 million in cash. At the date of acquisition, SSC's equity consists of capital stock of $20 million, retained earnings of $32 million (credit balance), and accumulated other comprehensive income of $4 million (credit balance). SSC's books report current assets of $16 million, equipment of $120 million, and liabilities of $80 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 $16 million has a fair value of $24 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 SSC's book value Excess of acquisition cost over book value $ Excess of fair value over book value: Equipment Goodwill (E) Capital stock . Prepare working paper eliminating entries (E) and (R) to consolidate the balance sheet accounts of Polaris and SSC at the date of acquisition. Credit Debit Retained earnings Investment in SSC 80 56 24 8 16 (R) Goodwill To eliminate SSC's equity accounts against the investment account + # + Capital stock Equipment To revalue SSC's assets and liabilities to fair value + + + 20 NOOooo 32 0 0 0 0 0 0 0 0 0 0 0 0
Polaris Company acquires all of the stock of SSC, Inc. for $80 million in cash. At the date of acquisition, SSC's equity consists of capital stock of $20 million, retained earnings of $32 million (credit balance), and accumulated other comprehensive income of $4 million (credit balance). SSC's books report current assets of $16 million, equipment of $120 million, and liabilities of $80 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 $16 million has a fair value of $24 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 SSC's book value Excess of acquisition cost over book value $ Excess of fair value over book value: Equipment Goodwill (E) Capital stock . Prepare working paper eliminating entries (E) and (R) to consolidate the balance sheet accounts of Polaris and SSC at the date of acquisition. Credit Debit Retained earnings Investment in SSC 80 56 24 8 16 (R) Goodwill To eliminate SSC's equity accounts against the investment account + # + Capital stock Equipment To revalue SSC's assets and liabilities to fair value + + + 20 NOOooo 32 0 0 0 0 0 0 0 0 0 0 0 0
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 $80 million in cash. At the date of acquisition, SSC's equity consists of capital stock of $20 million, retained earnings of $32 million (credit
balance), and accumulated other comprehensive income of $4 million (credit balance). SSC's books report current assets of $16 million, equipment of $120 million, and liabilities of $80 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 $16 million has a fair value of $24 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
$
80
SSC's book value
56
Excess of acquisition cost over book value $
24
Excess of fair value over book value:
Equipment
Goodwill
(E) 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
Retained earnings
Investment in SSC
$
(R) Goodwill
8
16
To eliminate SSC's equity accounts against the investment account
Capital stock
Equipment
To revalue SSC's assets and liabilities to fair value
20
32
0
0
0
0
0
0
0
0
0
0
0
0
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