Panel Corporation Acquired the Voting Stock of Shutter Company on January

Essay

Panel Corporation acquired the voting stock of Shutter Company on January 1, 2019 for $20,000 in cash and stock. Shutter's equity at the date of acquisition consisted of $1,000 in capital stock, a retained deficit of $400, and accumulated other comprehensive income of $20. Shutter's net assets were reported at amounts approximating fair value, but Panel's accountants identified the following unreported intangibles:
$\begin{array}{lr}&\text { Fair Value }\\\hline\text { Skilled workforce } & \$ 1,500 \\\text { Internet domain name } & 500 \\\text { Customer relationships (not contractual) } & 1,000 \\\text { Customer order backlog } & 400\end{array}$
Any previously unreported intangibles meeting the criteria for capitalization as identifiable intangibles are straight-line amortized over five years. There is no goodwill impairment in the first three years following acquisition. Shutter reported net income of $300 and declared no dividends in 2021. Its shareholders' equity at December 31, 2020 consists of $1,000 in capital stock, retained earnings of $300, and accumulated other comprehensive income of $45. Panel uses the cost method to report its investment in Shutter on its own books.
Required
a. Calculate goodwill arising from this acquisition.
b. Prepare the consolidation working paper eliminating entries (A), (E), (R), and (O) for 2021, in journal form.