Question: On January 1, 2014, Delta Inc. acquired 80% of Sigma Company's outstanding stock for $80,000 cash. Following are the balance sheets for Delta and Sigma immediately before the acquisition, as well as fair value information regarding Sigma's assets and liabilities:
Required: 1. Prepare the entry Delta would make to record the acquisition of Sigma under the acquisition method. Use the amount paid by Delta for its 80% interest to impute the total fair value of Sigma at acquisition.
2. Calculate the amount of goodwill that Delta will record as a result of acquiring Sigma.
3. Provide the adjustment and elimination entries Delta would make to prepare the consolidated balance sheet immediately after the acquisition.
4. Prepare the consolidated balance sheet for Delta immediately after its acquisition of Sigma Company.
5. Repeat requirements 1-4 under the purchase method. (Note to student: Ignore the fact that the date in this problem would preclude the use of the purchase method.)