Photec Corporation Acquires the Voting Stock of Solarcentury Inc

Essay

Photec Corporation acquires the voting stock of Solarcentury Inc. on January 1, 2020. In preparing to consolidate the trial balances of Photec and Solarcentury at December 31, 2021 (two years after the acquisition), you assemble the following information:
Date-of-acquisition information:
1) Value of stock issued to Solarcentury shareholders: $99,000.
2) Direct merger costs: $800 and stock registration fees, $350, all paid in cash.
3) Solarcentury shareholders' equity: $23,500, consisting of capital stock, $5,000; retained earnings, $18,000; accumulated other comprehensive income, $500.
4) Fair value of earnings contingency agreement to be paid in cash: $1,000.
5) Fair value of previously unrecorded identifiable intangibles (5-year life): $25,000. There are no revaluations of Solarcentury's reported net assets.
Information for 2020 and 2021:
6) Solarcentury's reported net income for 2020: $8,000; for 2021: $6,500.
7) Solarcentury's reported other comprehensive income for 2020: $75 gain; for 2021: $125 loss.
8) Solarcentury declared and paid dividends of $300 each year.
9) Goodwill and identifiable intangibles are not impaired in 2020; goodwill is impaired by $700 in 2021.
Required
a. Prepare the 2020 and 2021 journal entries made by Photec to record its investment, using the complete equity method.
b. Prepare the consolidation eliminating entries made at December 31, 2021.