Question

Following are selected account balances from Penske Company and Stanza Corporation as of December 31, 2018:

	Penske					Stanza
Revenues	$	(726,000	)			$	(768,000	)
Cost of goods sold		259,100					192,000
Depreciation expense		198,000					230,000
Investment income		Not given					0
Dividends declared		80,000					60,000
Retained earnings, 1/1/18		(604,000	)				(252,000	)
Current assets		514,000					506,000
Copyrights		984,000					472,500
Royalty agreements		650,000					1,088,000
Investment in Stanza		Not given					0
Liabilities		(570,000	)				(1,248,500	)
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 $759,000 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 $570,000 book value but a fair value of $696,000.

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?  

   a.	Consolidated copyrights
   b.	Consolidated net income
   c.	Consolidated retained earnings
   d.	Consolidated goodwill

Answer 1