Pacific Corporation Acquired All of the Voting Stock of Seagate

Essay

Pacific Corporation acquired all of the voting stock of Seagate Inc. at an acquisition cost of $500 million on January 1, 2020. Seagate's book value at the date of acquisition was $90 million, consisting of $10 million in capital stock, $85 million in retained earnings, and $5 million in treasury stock. Seagate's identifiable net assets were revalued as follows:
During 2020, Seagate reported net income of $6,000,000 and declared and paid dividends of $1,000,000. Seagate does not report any other comprehensive income. The brand names were impaired by $200,000. Pacific reports its investment in Seagate on its own books using the complete equity method.
Required
a. Calculate equity in net income for 2020, reported on Pacific's books.
b. Prepare eliminating entries (C), (E), (R) and (O), to consolidate the trial balances of Pacific and Seagate at December 31, 2020. Assume all revaluation write-offs are reported as adjustments to operating expenses.