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Big Co. bought 100% of Little's voting stock on 1/1/20 for $645
Little had a book value of $338
Little had the following misvalued or unreported assets and/or liabilities:
Little's inventory (FIFO basis) was undervalued by $6
Little's PPE (7 year remaining life) was undervalued by $24
Little had in-process R&D (4year remaining life) valued at $8
Little had bonds payable (3 year remaining life) undervalued by $11
Any remaining differential was attributed to goodwill
At the end of 2020 and 2021 impairment tests were prepared. It was determined that at the end of 2020 the correct goodwill
At the end of 2021 the correct goodwill value was determined to be $244
Trial balances for 1/1/20, 12/31/20, and 12/31/21 are given below.
Required:
Prepare a "differential analysis" to determine the correct amount of goodwill at purchase
Prepare elimination entries and complete the "consolidation at date of acquisition"
Prepare equty method and elimination entries and complete the consolidation worksheet for both 2020 and 2021.
Note that "interest expense" and R&D amortization are included within "other expenses" in the in
cost