On 1/1/20x0, Prospector, Inc. acquired 100% of the outstanding common stock of Sinclair, Inc. for $650,000 cash and 22,000 common shares of their $1 par value common stock. On 1/1/20x1, their common stock traded on public markets for $4.00 per share. Following is Sinclair’s pre-acquisition Balance Sheet at 1/1/20x1:

Sinclair Company
Balance Sheet
1/1/20x0
Assets		Liabilities and Equity
Cash and short-term investments	$70,000	Accounts payable	$60,000
Accounts receivable	50,000	Noncurrent liabilities	180,000
Supplies	20,000	Common stock	300,000
Total Current Assets	140,000	Additional paid-in capital	60,000
Equipment, net	240,000	Retained earnings, 1/1/20x0	120,000
Buildings, net	140,000
Land	90,000
Intangible assets	110,000
Total Assets	$720,000	Total Liabilities and Equity	$720,000

In addition, Sinclair’s assets and liabilities were understated as follows:

Fair value adjustment	Remaining Useful life
Equipment	($16,000)	8 years
Buildings	$100,000	20 years
Land	$74,000	-
Intangible assets	$100,000	10 years

Sinclair, Inc.’s net income and dividends declared and paid were:

Fye 20x0	Fye 20x1
Net income	$96,000	$132,000
Dividends declared and paid	$12,000	$36,000

For fiscal years 20x0 and 20x1, Sinclair did not issue additional common stock or other equity.

Required

1. Record Prospector Inc.’s acquisition of Sinclair Corporation on 1/1/20x0.
2. 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. Prepare a schedule showing the computation of goodwill recorded at acquisition, if any.
4. Prepare Prospector’s journal entries for 20x0 and 20x1 related to their acquisition of Sinclair Company.
5. Prepare the consolidating worksheet journal entries for fiscal year-ending 20x0.
6. Prepare the consolidating worksheet journal entries for fiscal year-ending 20x1.

Answer rating: 100% (QA)

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