On 1/1/20x1, Petwoud Company exchanged 25,000 shares of its $1 par value common stock and $150,000 cash to acquire 80% of the outstanding voting common stock of Supagud, Inc. At the acquisition date, the fair value of Petwoud Company’s common stock was $20 per share. Petwoud’s payment includes a control premium of $15,000.

Other investors, unrelated to Petwoud Company, hold the remaining 20% of the outstanding common stock of Supagud.

After the acquisition, Supagud, Inc. will continue as a separate operating company. In its separate accounting records, Petwoud Company will apply the equity method to account for their investment in Supagud.

The pre-acquisition trial balance for Supagud at 1/1/20x1 was:

Cash	50,000
Accounts receivable	125,000
Other current assets	105,000
Buildings	510,000
Land	217,000
Accounts Payable		35,000
Long-term debt		300,000
Common stock		420,000
Retained earnings		252,000

At the acquisition date, Supagud’s building had a fair value of $538,000 and they controlled an unrecorded patent with a fair value of $80,000. The book value of all other assets and liabilities of Supagud were equal to the relate fair values. At 1/1/20x1, the remaining useful lives of the building and the unrecorded patent were 10 years and 20 years, respectively.

Supagud’s 20x1 net income and dividends were:

Net income	$75,000
Dividends declared and paid	$30,000

Supagud did not issue any common stock during fiscal year 20x1.

Required

1. a. Prepare the journal entry to record Petwoud Company’s investment in Supagud, Inc. at 1/1/20x1.
2. b. Prepare a schedule showing the allocation of the purchase price to the fair value of the net assets acquired, including periodic depreciation/amortizations of the related purchase price adjustments.
3. c 1)
4. Prepare a schedule showing the computation of goodwill recorded at acquisition, if any.
5. c 2 )
6. Prepare the worksheet consolidation journal entries for fiscal year-ending 12/31/20x1.

Answer rating: 100% (QA)

Required A Acquisition Method Journal entries Date Accounts Debit Credit 1120x1 Business Purchase 60... View the full answer