On 1/1/20x1, Mt. Holly, Inc. paid $588,000 to acquire 100% of the outstanding common stock of Laurelton Corporation. Mt. Holly, Inc. will use the equity method to account for the investment.

At the acquisition date, Laurelton Corporation’s pre-acquisition trial balance was:

	Debit	Credit
Cash and short-term investments	70,000
Accounts receivable	50,000
Supplies	20,000
Machinery and equipment, net	240,000
Buildings, net	140,000
Land	90,000
Intangible assets, indefinite life	110,000
Accounts payable		60,000
Long-term liabilities		180,000
Common stock		300,000
Additional paid-in capital		60,000
Retained earnings, 1/1/20x1		120,000

In addition, the fair value and remaining useful lives of the acquired noncurrent assets at acquisition were:

• Land - $102,000,
• Buildings (20 years) - $188,000, and
• Machinery and equipment (8 years) - $216,000.
• Previously unrecorded patent recognized at acquisition (10 years) - $72,000

During 20x1, Laurelton Corporation reported net income of $96,000 while paying dividends of $12,000. During 20x2, Laurelton Corporation reported net income of $132,000 while paying dividends of $36,000.

Required

1. Record Mt. Holly Inc.’s acquisition of Laurelton Corporation at 1/1/20x1.
2. Prepare a schedule showing the amount of purchase price allocated to non-current assets, including periodic depreciation/amortizations of the related purchase price adjustments.
3. Determine the amount of goodwill recorded at acquisition, if any.
4. Prepare the consolidation worksheet journal entries for fiscal year-ending 20x1.
5. Prepare the consolidating worksheet journal entries for fiscal year-ending 20x2.

Answer rating: 100% (QA)

Stepbystep explanation Requirement A Debit Credit Cash and Other Short Term Investments 7000000 5000... View the full answer