On December 31, 2015, Aron Company purchases 100% of the common stock of Shield Company for $450,000 cash. On this date, any excess of cost over book value is attributed to accounts with fair values that differ from book values. These accounts of Shield Company have the following fair values:
|
Cash
|
$ 40,000
|
|
Accounts receivable
|
30,000
|
|
Inventory
|
140,000
|
|
Land
|
45,000
|
|
Buildings and equipment
|
225,000
|
|
Copyrights
|
25,000
|
|
Current liabilities
|
65,000
|
|
Bonds payable
|
105,000
|
The following comparative balance sheets are prepared for the two companies immediately after the purchase:
Aron
Shield
Cash
$ 185,000
$ 40,000
Accounts receivable
70,000
30,000
Inventory
130,000
120,000
Investment in Shield Company
450,000
Land
50,000
35,000
Buildings and equipment
350,000
230,000
Accumulated depreciation
(100,000)
(50,000)
Copyrights
40,000
10,000
Total assets
$1,175,000
$415,000
Current liabilities
$ 192,000
$ 65,000
Bonds payable
100,000
Common stock ($10 par)-Aron
100,000
Common stock ($5 par)-Shield
50,000
Paid-in capital in excess of par
250,000
70,000
Retained earnings
633,000
130,000
Total liabilities and equity
$1,175,000
$415,000
Attachment:- Template.rar