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Eliminating Entries, Previously Unreported Intangibles,Goodwill

Pirin Company acquires all of the voting stock of SkodaAutomotive for $40 million in cash. Skoda’s balance sheet accountsat the date of acquisition are listed below.

(in millions)	Dr(Cr)
Current assets	$1.2
Property, plant and equipment	10.8
Current liabilities	(2.0)
Long-term liabilities	(7.9)
Capital stock	(0.8)
Retained earnings	(1.6)
Accumulated other comprehensive income	0.3
Total	$0.0

Date-of-acquisition book values approximate fair value for allreported assets and liabilities. The following previouslyunreported intangibles are identified as belonging to Skoda, alongwith their estimated fair values at the date of acquisition (inmillions):

Synergies with Pirin technologies	$2.0
Order backlogs	1.5
Technical expertise of workforce	8.0
Cost savings on future contracts	3.5
Developed technology	6.0

Required

a. Prepare a schedule calculating the goodwill to be recognizedfor this acquisition.

Do not use negative signs with your answers.

Enter answers in millions (do not round answers).

Acquisition cost			$Answer
Skoda’s book value			Answer
Excess of acquisition cost over book value			Answer
Excess of fair value over book value:
Order backlogs		Answer
Developed technology		Answer	Answer
Goodwill			$Answer

b. Prepare the eliminating entries necessary to consolidate thebalance sheet accounts of Pirin and Skoda at the date ofacquisition.  

Enter answers in millions. Do not round answers.

Ref.	Description		Debit	Credit
(E)	Capital stock		Answer	Answer
	AnswerAOCIGoodwillInvestment in SkodaRetainedearningsInvestment in Skoda		Answer	Answer
	AnswerAOCIGoodwillInvestment in SkodaRetainedearningsInvestment in Skoda		Answer	Answer
	Investment in Skoda		Answer	Answer
(R)	Order backlogs		Answer	Answer
	Developed technology		Answer	Answer
	AnswerAOCIGoodwillInvestment in SkodaRetainedearningsInvestment in Skoda		Answer	Answer
	AnswerAOCIGoodwillInvestment in SkodaRetainedearningsInvestment in Skoda		Answer	Answer