Question

On July 1, 2011, Polliwog Incorporated paid cash for 21,000 shares of Salamander Company's $10 par value stock, when it was trading at $22 per share. At that time, Salamander's total stockholders' equity was $597,000, and they had 30,000 shares of stock outstanding, both before and after the purchase. The book value of Salamander's net assets is believed to approximate the fair values.

Requirement 1: Prepare the journal entry that Polliwog would record at the date of acquisition on their general ledger.

Requirement 2: Calculate the balance of the goodwill that would be recorded on Polliwog's general ledger, on Salamander's general ledger, and in the consolidated financial statements.

Answer

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