Plum Corporation acquired all the stock of Sudbury Company, at an acquisition co
ID: 2339085 • Letter: P
Question
Plum Corporation acquired all the stock of Sudbury Company, at an acquisition cost of $600 million. Sudbury’s book value at the date of acquisition was $100 million. Sudbury's assets and liabilities are carried at amounts approximating fair value, except its equipment is overvalued by $225 million, its long-term debt is overvalued by $30 million, and its trademarks are undervalued by $80 million. Sudbury has no previously unreported identifiable intangible assets.
Required:
Prepare consolidation eliminating entries (E) and (R) at the date of acquisition.
Explanation / Answer
Calculation of Goodwill
(in millions)
Acquisition cost
$ 600.00
Book value of Sudbury Company
$ 100.00
Revaluations
Land
$ 225.00
Long term debt
-$ 30.00
Trademarks
-$ 80.00
$ 215.00
Goodwill
$ 385.00
Elimination entries
(in millions)
Account titles
Debit
Credit
(C)
Stockholders' equity - Sudbury Company
$ 100.00
Investment in Sudbury Company
$ 100.00
(E)
Land
$ 225.00
Goodwill
$ 385.00
Long term debt
$ 30.00
Trademarks
$ 80.00
Investment in Sudbury Company
$ 500.00
Calculation of Goodwill
(in millions)
Acquisition cost
$ 600.00
Book value of Sudbury Company
$ 100.00
Revaluations
Land
$ 225.00
Long term debt
-$ 30.00
Trademarks
-$ 80.00
$ 215.00
Goodwill
$ 385.00