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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

Financial Reporting, Financial Statement Analysis and Valuation
Financial Reporting, Financial Statement Analysis and Valuation
8th Edition
ISBN:9781285190907
Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Chapter8: Investing Activities
Section: Chapter Questions
Problem 22PC
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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 ✔
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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