Portobello Company bought all of Strata Company's voting stock on January 1, 2020 for $20,000. Fair value information on Strata's assets and liabilities at the date of acquisition is as follows:
•Plant and equipment is overvalued by $5,000. P&E has a 10-year remaining life, straight-line.
•Previously unreported identifiable intangibles, meeting the criteria for capitalization, are valued at $7,000. These intangibles have indefinite lives, but testing reveals impairment of $800 in 2020.
•Goodwill reported for this acquisition is not impaired in 2020.
Portobello uses the complete equity method to account for its investment in Strata on its own books. Trial balances for both companies at December 31, 2020 are in the consolidation working paper below.
Required
a. Calculate the initial goodwill recognized for this acquisition.
b. Calculate equity in net income, reported on Portobello's books, for 2020.
c. Fill in the working paper to consolidate the trial balances of the two companies at December 31, 2020.
d. Prepare, in good form, the 2020 consolidated statement of income and comprehensive income and the consolidated balance sheet at December 31, 2020.

Question

Portobello Company bought all of Strata Company's voting stock on January 1, 2020 for $20,000. Fair value information on Strata's assets and liabilities at the date of acquisition is as follows:
•Plant and equipment is overvalued by $5,000. P&E has a 10-year remaining life, straight-line.
•Previously unreported identifiable intangibles, meeting the criteria for capitalization, are valued at $7,000. These intangibles have indefinite lives, but testing reveals impairment of $800 in 2020.
•Goodwill reported for this acquisition is not impaired in 2020.
Portobello uses the complete equity method to account for its investment in Strata on its own books. Trial balances for both companies at December 31, 2020 are in the consolidation working paper below.
  Required
a. Calculate the initial goodwill recognized for this acquisition.
b. Calculate equity in net income, reported on Portobello's books, for 2020.
c. Fill in the working paper to consolidate the trial balances of the two companies at December 31, 2020.
d. Prepare, in good form, the 2020 consolidated statement of income and comprehensive income and the consolidated balance sheet at December 31, 2020.

Quizplus · Accepted Answer

The Answer of Portobello Company bought all of Strata Company's voting stock on January 1, 2020 for $20,000. Fair value information on Strata's assets and liabilities at the date of acquisition is as follows:
•Plant and equipment is overvalued by $5,000. P&E has a 10-year remaining life, straight-line.
•Previously unreported identifiable intangibles, meeting the criteria for capitalization, are valued at $7,000. These intangibles have indefinite lives, but testing reveals impairment of $800 in 2020.
•Goodwill reported for this acquisition is not impaired in 2020.
Portobello uses the complete equity method to account for its investment in Strata on its own books. Trial balances for both companies at December 31, 2020 are in the consolidation working paper below.
  Required
a. Calculate the initial goodwill recognized for this acquisition.
b. Calculate equity in net income, reported on Portobello's books, for 2020.
c. Fill in the working paper to consolidate the trial balances of the two companies at December 31, 2020.
d. Prepare, in good form, the 2020 consolidated statement of income and comprehensive income and the consolidated balance sheet at December 31, 2020.

Portobello Company Bought All of Strata Company's Voting Stock on January