On January 1, 2014, Pluto Company acquired all of Saturn Companys common stock for $1,000,000 cash. On

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On January 1, 2014, Pluto Company acquired all of Saturn Company€™s common stock for $1,000,000 cash. On that date, Saturn had retained earnings of $200,000 and common stock of $600,000. The book values of Saturn€™s assets and liabilities were equal to fair values except for the following:

On January 1, 2014, Pluto Company acquired all of Saturn

Additional Information:
1. The equipment had an estimated remaining useful life of five years at acquisition.
2. Goodwill was not impaired at December 31, 2014, but was impaired by $25,000 at December 31, 2015.
3. Reported income for Pluto (excluding equity income from Saturn€™s earnings) and Saturn follows:

On January 1, 2014, Pluto Company acquired all of Saturn

Required:
1. Prepare the January 1, 2014, journal entry on Pluto€™s books to record the acquisition of Saturn.
2. Prepare the elimination entries needed to prepare a consolidated balance sheet immediately after acquisition.
3. Calculate consolidated income for 2014 and2015.

Goodwill
Goodwill is an important concept and terminology in accounting which means good reputation. The word goodwill is used at various places in accounting but it is recognized only at the time of a business combination. There are generally two types of...
Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on...
Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
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Financial Reporting and Analysis

ISBN: 978-0078025679

6th edition

Authors: Flawrence Revsine, Daniel Collins, Bruce, Mittelstaedt, Leon

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