Reference no: EM133129640
Question - On 1/1/20x0, Prospector, Inc. acquired 100% of the outstanding common stock of Sinclair, Inc. for $650,000 cash and 22,000 common shares of their $1 par value common stock. At 1/1/20x1, their common stock traded on public markets for $4.00 per share. Following is Sinclair's pre-acquisition Balance Sheet at 1/1/20x1:
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Sinclair Company Balance Sheet 1/1/20x0
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Assets
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Liabilities and Equity
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Cash and short-term investments
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$70,000
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Accounts payable
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$60,000
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Accounts receivable
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50,000
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Noncurrent liabilities
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180,000
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Supplies
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20,000
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Common stock
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300,000
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Total Current Assets
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140,000
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Additional paid-in capital
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60,000
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Equipment, net
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240,000
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Retained earnings, 1/1/20x0
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120,000
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Buildings, net
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140,000
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Land
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90,000
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Intangible assets
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110,000
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Total Assets
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$720,000
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Total Liabilities and Equity
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$720,000
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In addition, Sinclair's assets and liabilities were understated as follows:
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Fair value adjustment
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Remaining Useful life
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Equipment
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($16,000)
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8 years
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Buildings
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$100,000
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20 years
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Land
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$74,000
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-
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Intangible assets
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$100,000
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10 years
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Sinclair, Inc.'s net income and dividends declared and paid were:
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Fye 20x0
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Fye 20x1
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Net income
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$96,000
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$132,000
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Dividends declared and paid
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$12,000
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$36,000
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For fiscal years 20x0 and 20x1, Sinclair did not issue additional common stock or other equity.
Required -
1. Record Prospector Inc.'s acquisition of Sinclair Corporation at 1/1/20x0.
2. Prepare the schedule showing the allocation of the purchase price to the fair value of the net assets acquired, including periodic depreciation/amortizations of the related purchase price adjustments.
3. Prepare the schedule showing the computation of goodwill recorded at acquisition, if any.
4. Prepare Prospector's journal entries for 20x0 and 20x1 related to their acquisition of Sinclair Company.
5. Prepare the consolidating worksheet journal entries for fiscal year-ending 20x0.
6. Prepare the consolidating worksheet journal entries for fiscal year-ending 20x1.
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