Pilgrim Corporation acquires all of the stock of Sonic Company for $5,000,000 in
ID: 2339502 • Letter: P
Question
Pilgrim Corporation acquires all of the stock of Sonic Company for $5,000,000 in cash. Sonic's net assets had a book value of $3,000,000 at the date of acquisition. The book values of Sonic's assets and liabilities approximated fair values, except that Sonic reported inventories at $900,000 more than fair value and plant assets at $2,000,000 more than fair value. In addition, Sonic had unrecorded identifiable intangible assets with an estimated fair value of $5,000,000, appropriately capitalized according to GAAP.
Consolidation working paper eliminating entry (R) at the date of acquisition includes a credit to Investment in Sonic in the amount of:
$3,000,000
$7,900,000
$5,000,000
$2,100,000
A.$3,000,000
B.$7,900,000
C.$5,000,000
D.$2,100,000
Explanation / Answer
The consolidation working paper eliminating entry (R) at the date of acquisition will include a credit to investment in Sonic in the amount that is equal to what Pilgrim paid to acquire all of the stock of Sonic Company.
Therefore, the correct answer is C. $5,000,000