Pierce Corporation acquires all the voting stock of Stick Company for $100 million in cash. Stick's equity accounts at the date of acquisition total $20 million, consisting of the following:
Capital stock…………………………………………………… $ 5 million
Retained earnings………………………………………….. 15 million
Stick's assets and liabilities are reported at amounts approximating fair value, except its plant assets are undervalued by $8 million. It has no unreported identifiable intangible assets.
Required
Prepare eliminating entries (E) and (R) for the consolidation working paper at the date of acquisition.

Question

Quizplus · Accepted Answer

The Answer of Pierce Corporation acquires all the voting stock of Stick Company for $100 million in cash. Stick's equity accounts at the date of acquisition total $20 million, consisting of the following:
Capital stock…………………………………………………… $ 5 million
Retained earnings………………………………………….. 15 million
Stick's assets and liabilities are reported at amounts approximating fair value, except its plant assets are undervalued by $8 million. It has no unreported identifiable intangible assets.
Required
Prepare eliminating entries (E) and (R) for the consolidation working paper at the date of acquisition.

Pierce Corporation Acquires All the Voting Stock of Stick Company