1. On January 2, 2018, Peer Industries acquired all of Star Corporation’s voting stock for $10,000. Star’s book value at the date of acquisition was $6,500. Total goodwill of $2,500 was recognized at the date of acquisition. Star’s reported assets and liabilities had book values that approximated fair value at the date of acquisition, but it had previously unreported customer lists (5-year life, straight-line) valued at $1,000.

It is now December 31, 2021, four years after the date of acquisition. Goodwill impairment for the years 2018-2020 totaled $300, and goodwill impairment for 2021 is $50. No impairment losses were reported for the customer lists for any year since acquisition.

December 31, 2021 trial balances for Peer and Star are as follows:

	Peer		Star
	Debit	Credit	Debit	Credit
Current assets	$5,000		$2,500
Fixed assets, net	49,300		24,920
Identifiable intangibles
Investment in Star	12,770
Goodwill
Liabilities		22000		17000
Capital stock		15000		2000
Retained earnings, Jan. 1		27900		7200
AOCI, Jan. 1		600		400
Sales revenue		25000		12000
Equity in NI—Star		550
Equity in OCI —Star		20
Cost of goods sold	20,000		7,000
Operating expenses	4,000		4,200
Other comprehensive income				20
Totals	$91,070	$91,070	$38,620	$38,620

Peer uses the complete equity method to account for its investment in Star.

Star's reported net income	800
Increase in amortization expense $1,000/5 years	(200)
Goodwill impairment loss	(50)
Equity in Net Income of Star = Equity Method Revenue	550

Required: Prepare the consolidating workpaper, including the entries (C), (E), (R), and (O) to consolidate the accounts of the two companies on December 31, 2021.

Answer rating: 100% (QA)

To prepare the consolidating workpaper and the required entries C E R and O to consolidate the accou... View the full answer