Problem 2 On January 1, Year 1, Manny Company acquired all o…
Problem 2 On January 1, Year 1, Manny Company acquired all of Fernandez Company’s outstanding common stock for $842,000 cash. Fernandez Company reported an acquisition-date carrying value for its net assets of $720,000 (Common Stock $400,000 and Retained Earnings $320,000). As of the acquisition date, one of Fernandez’s Buildings with a 12-year remaining life had a fair value that exceeded its carrying value by $72,000. Also, Equipment with a remaining life of 10 years had a fair value that exceeded its carrying value by $10,000. Finally, Manny attributed a fair value of $40,000 to a licensing agreement that was unrecorded on Fernandez’s balance sheet. The remaining useful life of the licensing agreement was estimated at 40 years. The book values of all of Fernandez’s other assets and liabilities were equal to their fair values on the acquisition date. During Year 1, Fernandez reported Net Income of $100,000 and paid $30,000 of dividends. In Year 2, Fernandez reported Net Income of $120,000 and paid dividends of $20,000. Required Assuming Manny accounts for its investment in Fernandez Company on the equity method, prepare the consolidating entries required on December 31, Year 2. Label your work so that I can follow what you are doing. For online students, I suggest you use the Table function in Canvas.