Goodwill On February 15, 2010, Pendragon Corporation acquired all of the stock of Sherwood, Inc. for $300 million in cash. Sherwood's stockholders' equity accounts at the date of acquisition were as follows:
(in millions)
Common stock, par .............................................................. $ 5
Additional paid-in capital ....................................................... 15
Retained earnings (deficit) .................................................... (30)
Accumulated other comprehensive income .................................... 4
Treasury stock.................................................................... (3)
Total stockholders' equity (deficit) .......................................... $ (9)
Customer lists ................................................................... $40
Brand names ...................................................................... 60
Assume Sherwood's fixed assets are overstated by $10 million, its liabilities are overstated by $1 million, and its other assets and liabilities are fairly reported.
Required
a. Calculate the goodwill for this acquisition.
b. Present the working paper eliminating entries necessary to consolidate the balance sheets of Pen-dragon and Sherwood at the date of acquisition.