Prepare a schedule showing the amount of purchase price

Reference no: EM132783391

Question - At-Home Technologies acquired a majority interest in Illinois Information Systems (IIS). The acquisition, which occurred on January 1, 20x1, involved At-Home purchasing 70% of the outstanding common stock of IIS for $430,000 and 11,000 shares $2 par value common stock. At 1/1/20x1, At-Home's common stock traded for $20 per share on a reputable stock exchange.

At-Home's purchase price included a $20,000 control premium.

At 1/1/20x1, IIS's shareholders' equity consists of Common Stock (of $420,000) and Retained Earnings (of $252,000). At 1/1/20x1, there are no other items recorded in IIS's shareholders' equity accounts on its pre-acquisition trial balance.

Additionally, at the acquisition date, IIS's assets include a building that is undervalued by $28,000 and an intangible asset related to acquired research and development (R&D) that is undervalued by $80,000. The building has a remaining useful life of 10 years and the R&D intangible asset has a remaining useful life of 20 years.

And, At-Home Technologies will use the equity method to account for their investment in IIS, of course.

In fiscal years-ending 20x1, 20x2, & 20x3, IIS:

Generated net income of: $105,000; $134,000; and $154,000, respectively, and

Declared dividends of: $54,600, $61,600, and $84,000, respectively.

Over the 3-year period 20x1-20x3, assume that IIS's common stock balance does not change.

Required -

A. Prepare the journal entry to record At-Home's acquisition of IIS at 1/1/20x1.

B. Prepare a schedule showing the amount of purchase price allocated to non-current assets, including periodic depreciation/amortizations of the related purchase price adjustments.

C. Prepare a schedule showing the goodwill (or gain on bargain purchase) recorded at acquisition, if any.

D. Prepare a schedule detailing the amount of income that At-Home will record from their investment in IIS for each fiscal year-ending 12/31/20x1, 12/31/20x2 and 12/31/20x3.

E. Prepare a schedule detailing the activity in At-Home's "Investment in IIS" account from 1/1/20x1 through 12/31/20x3.

F. Prepare the consolidation worksheet journal entries as of 12/31/20x1.

Reference no: EM132783391

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