Reference no: EM133057726

Question - On January 1, 2020, Panadrone Inc. acquired all of the stock of Skyline Telecom for $85,000 in cash. At the date of acquisition, Skyline's shareholders' equity accounts were as follows:

Common stock, $1 par $1,000

Additional paid-in capital 14,000

Retained earnings (3,000)

Treasury stock (200)

Total $11,800

Both companies have a December 31 year-end. At the date of acquisition, Skyline reported net assets had book values approximating fair value. However, it had previously unreported indefinite life identifiable intangibles valued at $15,000, meeting ASC Topic 805 requirements for capitalization. Impairment losses in 2020 for identifiable intangibles were $600. Goodwill from this acquisition was not impaired in 2020. Skyline reported net income of $900 in 2020, and paid no dividends. Panadrome uses the complete equity method to report its investment in Skyline on its own books.

Required -

a. Calculate the original amount of goodwill for this acquisition.

b. Calculate equity in net income of Skyline, reported on Panadrone's books in 2020.

c. Prepare eliminating entries (C), (E), (R) and (O), required to consolidate Panadrone's trial balance accounts with those of Skyline on December 31, 2020.