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Paulcraft Corporation builds large powerboats. On January 1 2011 Paulcraft acquires Switzer Corporation, a company that manufactures smaller power boats. Paulcraft pays cash in exchange for Switzer common stock. Switzer has the following balance sheet on January 1 2011:

Switzer Corporation
Balance Sheet
January 1, 2011
Assets
accounts receivable $82,000
Inventory 40,000
Buildings 60,000
Accumulated depreciation (50,000)
Equipment 100,000
Accumulated depreciation (30,000)
Total Assets $402,000
Liabilities and equity
current liabilities $90,000
Bonds payable 100,000
Common stock ($1 par) 10,000
Paid-in capital in excess of par 90,000
Retained earnings 112,000
Total liabilities and equity $402,00
Appraisal values for identifiable assets and liabilities are as follows:
Accounts receivable $82,000
Inventory (sold during 2011) 38,000
Land 150,000
Buildings (20 year life) 280,000
Equipment (5 year life) 100,000
Current liabilities 90,000
Bonds payable (5 year life) 96,000
Any remaining excess is attributed to goodwill.
Assume that Paulcraft pays $480,000 for 100% of Switzer common stock. Paulcraft uses the cost method to account for its investment in Switzer. Paulcraft and Switzer have the following trial balances on December 31 2013:
Paulcraft
cash 100,000
Accounts receivable 90,000
Inventory 120,000
Land 100,000
Investment in Switzer 480,000
Buildings 800,000
Accumulated depreciation (220,000)
Equipment. 150,000
Accumulated depreciation (90,000)
Current liabilities (60,000)
Common stock (100,000)
Paid-in capital in excess of par (900,000)
Retained earnings, January 1, 2013 (315,000)
Sales (800,000)
Cost of goods sold 450,000
Depreciation expense-building 30,000
Depreciation expense-equipment 15,000
other expenses 140,000
Dividend income (10,000)
Dividends declared 20,000
Total 0
Switzer
cash 110,000
Accounts receivable 55,000
Inventory 86,000
Land 60,000
Buildings 250,000
Accumulated depreciation (80,000)
Equipment 100,000
Accumulated depreciation (72,000)
Current liabilities (102,000)
Bonds payable (100,000)
Common stock (10,000)
Paid-in capital in excess of par (90,000)
Retained earnings, January 1, 2013 (182,000)
Sales (350,000)
Cost of goods sold 210,000
Depreciation expense- buildings 15,000
Depreciation expense-equipment 14,000
Other expenses 68,000
Interest expense 8,000
Dividends declared 10,000
Total 0
1. Prepare a value analysis and a determination and distribution of excess schedule for the investment in Switzer.

2. Complete a consolidated worksheet for Paulcraft Corporation and its subsidiary Switzer Corporation as of December 31, 2013. Prepare supporting amortization and income distribution schedules.

 

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