Pergo Hotels, headquartered in Portugal, issued 2,500 shares of common stock with a market value of €20 per share to acquire 90% of Simmons Resorts' voting stock. The fair value of the noncontrolling interest was €5,000. Simmons' book value was €20,000, comprised of €5,000 in capital stock and €15,000 in retained earnings. Its net assets are reported at fair value, except for the following:
•Current assets are undervalued by €2,000.
•Plant & equipment is undervalued by €4,000.
•Previously unrecorded customer lists are valued at €3,000.
•A preacquisition contingent liability (potential lawsuit), valued at €1,000, is not recorded on Simmons' books.
Pergo follows IFRS and uses the alternative method for valuing the noncontrolling interest and goodwill.
Required
a. Calculate the goodwill for this acquisition.
b. Prepare the eliminating entries to consolidate the trial balances of Pergo and Simmons at the date of acquisition.

Question

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The Answer of Pergo Hotels, headquartered in Portugal, issued 2,500 shares of common stock with a market value of €20 per share to acquire 90% of Simmons Resorts' voting stock. The fair value of the noncontrolling interest was €5,000. Simmons' book value was €20,000, comprised of €5,000 in capital stock and €15,000 in retained earnings. Its net assets are reported at fair value, except for the following:
•Current assets are undervalued by €2,000.
•Plant & equipment is undervalued by €4,000.
•Previously unrecorded customer lists are valued at €3,000.
•A preacquisition contingent liability (potential lawsuit), valued at €1,000, is not recorded on Simmons' books.
Pergo follows IFRS and uses the alternative method for valuing the noncontrolling interest and goodwill.
Required
a. Calculate the goodwill for this acquisition.
b. Prepare the eliminating entries to consolidate the trial balances of Pergo and Simmons at the date of acquisition.

Pergo Hotels, Headquartered in Portugal, Issued 2,500 Shares of Common