Reference no: EM131575181

Questions:

On January 1, 2015, Polly Co. purchased all of the outstanding stock of Suzie Co. for $837,500 in consideration. The common stock, additional paid-in capital, and retained earnings of Suzie Co. were$125,000, $37,500, and $482,500, respectively, on the date of the acquisition. A trademark (with a 10-year remaining life) was undervalued by $15,000, and existing technology with a 5-year life was worth $45,000 at the date of acquisition. Any remaining excess fair value was allocated to goodwill.

The December 31, 2016 balances for Suzie Co. and Polly Co. were as follows:

	Polly Co.	Suzie Co.
Revenues	(1,237,500)	(262,500)
Cost of Goods Sold	625,000	112,500
Depreciation Expense	125,000	6,250
Amortization Expense	68,750	22,500
Dividend Income	(50,000)
Net income	(468,750)	(121,250)
Retained earnings, 1/1/16	(1,943,750)	(562,500)
Net income	(468,750)	(121,250)
Dividends declared	312,500	50,000
Retained earnings, 12/31/16	(2,100,000)	(633,750)
Current assets	1,200,000	443,750
Investment in Polly Co.	837,500
Equipment (net)	956,250	281,250
Trademark	293,750	125,000
Existing technology		562,500
Goodwill	562,500
Total assets	3,850,000	1,412,500

Required:

Prepare an excel worksheet with 3 tabs.

1) A fair value allocation that shows the calculation of goodwill relative to the acquisition, and calculates the annual amount of amortization. (Hint: not all of the goodwill on Polly Co.'s balance sheet relates to its Suzie acquisition.)

2) A consolidating worksheet that shows the computation of the consolidated balances for Polly Co. and Suzie Co. as of December 31, 2016. Each consolidating journal entry should be labeled with its identifying letter.

3) A consolidating worksheet that simulates a goodwill impairment loss for 2016 (hint: only the amount of goodwill relating to the Suzie Co. acquisition is considered impaired.)