Gorman Inc. acquires all of the voting stock of Elvan Company for $25 million in cash, an amount that is $10 million above the book value of Elvan's net assets. At the date of acquisition, Elvan's plant assets were overvalued by $20 million and its reported intangible assets were undervalued by $30 million. Elvan's other identifiable assets and liabilities are reported at amounts approximating fair value at the date of acquisition, and it has no previously unreported identifiable intangible assets.
Required
Prepare consolidation eliminating entries (E) and (R) at the date of acquisition.

Question

Quizplus · Accepted Answer

The Answer of Gorman Inc. acquires all of the voting stock of Elvan Company for $25 million in cash, an amount that is $10 million above the book value of Elvan's net assets. At the date of acquisition, Elvan's plant assets were overvalued by $20 million and its reported intangible assets were undervalued by $30 million. Elvan's other identifiable assets and liabilities are reported at amounts approximating fair value at the date of acquisition, and it has no previously unreported identifiable intangible assets.
Required
Prepare consolidation eliminating entries (E) and (R) at the date of acquisition.