Question

1.

	Penske					Stanza
Revenues	$	(816,000	)			$	(724,000	)
Cost of goods sold		290,600					181,000
Depreciation expense		163,000					368,000
Investment income		Not given					0
Dividends declared		80,000					60,000
Retained earnings, 1/1/18		(700,000	)				(216,000	)
Current assets		460,000					550,000
Copyrights		950,000					447,000
Royalty agreements		662,000					1,122,000
Investment in Stanza		Not given					0
Liabilities		(554,000	)				(1,508,000	)
Common stock		(600,000	)	($20 par)			(200,000	)	($10 par)
Additional paid-in capital		(150,000	)				(80,000	)

Note: Parentheses indicate a credit balance.

On January 1, 2018, Penske acquired all of Stanza’s outstanding stock for $790,000 fair value in cash and common stock. Penske also paid $10,000 in stock issuance costs. At the date of acquisition copyrights (with a six-year remaining life) have a $520,000 book value but a fair value of $700,000.

1. As of December 31, 2018, what is the consolidated copyrights balance?

2. For the year ending December 31, 2018, what is consolidated net income?

3. As of December 31, 2018, what is the consolidated retained earnings balance?

4. As of December 31, 2018, what is the consolidated balance to be reported for goodwill?

Answer 1

Please find below table useful to compute desired results: -

End results would be as follows: -