On January 1, 20X1, Parent Company purchased 100% of the common stock of Subsidiary Company for $280,000. On this date, Subsidiary had total owners' equity of $240,000.
On January 1, 20X1, the excess of cost over book value is due to a $15,000 undervaluation of inventory, to a $5,000 overvaluation of Bonds Payable, and to an undervaluation of land, building and equipment. The fair value of land is $50,000. The fair value of building and equipment is $200,000. The book value of the land is $30,000. The book value of the building and equipment is $180,000. The fair value of identifiable net assets is $300,000 as determined from the worksheet as presented below:
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Trial Balance
Trial Balance
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Eliminations and
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Parent
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Sub.
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Adjustments
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Account Titles
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Company
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Company
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Debit
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Credit
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Assets:
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Inventory
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50,000
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30,000
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Other Current Assets
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239,000
|
165,000
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Investment in Subsidiary
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280,000
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Land
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120,000
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30,000
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Buildings
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350,000
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230,000
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Accumulated Depreciation
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(100,000)
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(50,000)
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Other Intangibles
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40,000
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Total
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979,000
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405,000
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Liabilities and Equity:
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Current Liabilities
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191,000
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65,000
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Bonds Payable
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100,000
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Common Stock - P Co.
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100,000
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Addn'l Pd-In Capt - P Co.
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150,000
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Retained Earnings - P Co.
|
538,000
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Common Stock - S Co.
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50,000
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Addn'l Pd-In Capt - S Co.
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70,000
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Retained Earnings - S Co.
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120,000
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NCI
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Total
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979,000
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405,000
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Required:
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a.
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Using the information above and on the separate worksheet, complete a value analysis schedule
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b.
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Complete schedule for determination and distribution of the excess of cost over book value.
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c.
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Complete the Figure 2-5 worksheet for a consolidated balance sheet as of January 1, 20X1.
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a. Value analysis schedule:
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Company Implied
Fair Value
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Parent Price
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Company fair value
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Fair value identifiable net assets
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Gain on acquisition
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b. Determination and Distribution Schedule:
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Company Implied
Fair Value
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Parent Price
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Fair value of subsidiary
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Less book value:
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C Stk
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APIC
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R/E
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Total S/E
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Interest Acquired
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Book value
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Excess of fair over book
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Adjust identifiable accounts:
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Inventory
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Land
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Bldgs & Equip
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Bond Pay Discount
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Gain on acquisition
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Total
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Trial Balance
Trial Balance
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Eliminations and
|
|
Parent
|
Sub.
|
Adjustments
|
|
Account Titles
|
Company
|
Company
|
Debit
|
Credit
|
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Assets:
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|
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|
|
|
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Inventory
|
50,000
|
30,000
|
|
|
|
|
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Other Current Assets
|
239,000
|
165,000
|
|
|
|
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Investment in Subsidiary
|
280,000
|
|
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|
|
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Land
|
120,000
|
30,000
|
|
|
|
|
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Buildings
|
350,000
|
230,000
|
|
|
|
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Accumulated Depreciation
|
(100,000)
|
(50,000)
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|
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Other Intangibles
|
40,000
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|
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Total
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979,000
|
405,000
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|
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Liabilities and Equity:
|
|
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Current Liabilities
|
191,000
|
65,000
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Bonds Payable
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|
100,000
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Common Stock - P Co.
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100,000
|
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Addn'l Pd-In Capt - P Co.
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150,000
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Retained Earnings - P Co.
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538,000
|
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Common Stock - S Co.
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50,000
|
|
|
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Addn'l Pd-In Capt - S Co.
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|
70,000
|
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Retained Earnings - S Co.
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|
120,000
|
|
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NCI
|
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Total
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979,000
|
405,000
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