Question

Consolidating Eliminating Entries, Date of Acquisition: U.S. GAAP and IFRS

Plummer Corporation acquired 90 percent of Softek Technologies' voting stock by issuing 2,000,000 shares of $2 par common stock with a fair value of $25,000,000. In addition, Plummer paid $500,000 in cash to the consultants and accountants who advised in the acquisition. Softek's stockholders' equity at the date of acquisition is as follows:

Common stock	$200,000
Additional paid-in capital	8,000,000
Retained earnings	5,000,000
Accumulated other comprehensive income	(800,000)
Treasury stock	(400,000)
Total	$12,000,000

Softek's assets and liabilities were carried at fair value except as noted below:

	Book Value	Fair Value
Plant assets, net	$12,000,000	$9,000,000
Trademarks	--	1,500,000
Customer lists	--	1,000,000
Long-term debt	2,000,000	2,100,000

The fair value of the non-controlling interest is estimated to be $2,500,000 at the date of acquisition.

Required

(a) Prepare the acquisition entry on Plummer's books and the working paper consolidation eliminating entries at the date of acquisition, following U.S. GAAP.

Enter all your answers in thousands. For example, $1,000,000 is $1,000.

Plummer's acquisition entry

General Journal
Description	Debit	Credit
AnswerInvestment in SoftekCashAdditional paid-in captialGoodwillGain on purchaseEquity in net income for SoftekTreasury stock	Answer	Answer
Merger expenses	Answer	Answer
AnswerInvestment in SoftekCashAdditional paid-in captialGoodwillGain on purchaseEquity in net income for SoftekTreasury stock	Answer	Answer
Common stock, par value	Answer	Answer
Additional paid-in capital	Answer	Answer

Consolidation eliminating entries

Consolidation Journal
Description	Debit	Credit
(E)
Common stock	Answer	Answer
AnswerInvestment in SoftekCashAdditional paid-in captialGoodwillGain on purchaseEquity in net income for SoftekTreasury stock	Answer	Answer
Retained earnings	Answer	Answer
Accumulated OCI	Answer	Answer
Treasury stock	Answer	Answer
AnswerInvestment in SoftekCashAdditional paid-in captialGoodwillGain on purchaseEquity in net income for SoftekTreasury stock	Answer	Answer
Non-controlling interest in Softek	Answer	Answer
(R)
Trademarks	Answer	Answer
Customer lists	Answer	Answer
AnswerInvestment in SoftekCashAdditional paid-in captialGoodwillGain on purchaseEquity in net income for SoftekTreasury stock	Answer	Answer
Plant assets, net	Answer	Answer
Long-term debt	Answer	Answer
AnswerInvestment in SoftekCashAdditional paid-in captialGoodwillGain on purchaseEquity in net income for SoftekTreasury stock	Answer	Answer
Noncontrolling interest in Softek	Answer	Answer

(b) Prepare the working paper consolidation eliminating entries at the date of acquisition, following IFRS and the alternative valuation method for non-controlling interests.

Enter all your answers in thousands, round to the nearest thousand, when appropriate.

Consolidation Journal
Description	Debit	Credit
(E)
Common stock	Answer	Answer
AnswerInvestment in SoftekCashAdditional paid-in capitalGoodwillGain on purchaseEquity in net income for SoftekTreasury stock	Answer	Answer
Retained earnings	Answer	Answer
Accumulated OCI	Answer	Answer
Treasury stock	Answer	Answer
AnswerInvestment in SoftekCashAdditional paid-in captialGoodwillGain on purchaseEquity in net income for SoftekTreasury stock	Answer	Answer
Noncontrolling interest in Softek	Answer	Answer
(R)
Trademarks	Answer	Answer
Customer lists	Answer	Answer
AnswerInvestment in SoftekCashAdditional paid-in captialGoodwillGain on purchaseEquity in net income for SoftekTreasury stock	Answer	Answer
Noncontrolling interest in Softek	Answer	Answer
Plant assets, net	Answer	Answer
Long-term debt	Answer	Answer
AnswerInvestment in SoftekCashAdditional paid-in captialGoodwillGain on purchaseEquity in net income for SoftekTreasury stock	Answer	Answer

Answer 1