Problem III. $(25$ points$).$

Paramount Co$.$ acquired all of Sanders Company on January $1,2021$ for $$2,000,000,$

which includes Paramount issuing $20,000$ shares $($$$10$ par$)$ of its $$80$ fair value common

shares and $$400,000$ cash. The book value of Sanders Co$.$ on this date was $$740,000$

$($common stock, $$220,000$; additional paid$-$in capital, $$160,000,$ and retained earnings,

$$360,000).$ Sanders will continue as a separate legal entity.

In addition, at the date of acquisition, Sanders had a building was overvalued by

$$120,000(12-$year life$)$; and, there were unrecorded customer contracts totaling $$580,000$

$(10-$year life$).$ Paramount incurred $$23,000$ in direct combination costs and $$42,000$ in

stock issue costs as a result of this acquisition.

On April $16,2021,$ Sanders Co$.$ declared a dividend of $$30,000,$ which was paid on May

$4.$ At December $31,2021,$ Sanders Co$.$ had net income of $$140,000.$

Instructions:

$1.$ Calculate the allocation of the acquisition price.

$2.$ Record the journal entry$($ies$)$ necessary to record the acquisition on January $1,2021.$

$3.$ Record the necessary journal entries during $2021.$

$4.$ Prepare the Consolidation Worksheet Entries for $2021.$