Sale of interest, alternative remaining interests. Cecil Inc. purchases 24,000 shares of Brown Corporation, which equates to an 80% interest, on January 1, 20X5. The following determination and distribution of excess schedule is prepared:
Determination and Distribution of Excess Schedule
|
Company Implied Fair Value
|
Parent Price (80%)
|
NCI Value (20%)
|
|
Fair value of subsidiary
|
$ 937,500
|
$750,000
|
$187,500
|
|
Less book value of interest acquired:
|
|
|
|
|
Common stock, $10 par
|
$ 300,000
|
|
|
|
Retained earnings
|
400,000
|
|
|
|
Total stockholders' equity
|
$ 700,000
|
$700,000
|
$700,000
|
|
Interest acquired
|
|
80%
|
20%
|
|
Book value
|
|
$560,000
|
$140,000
|
|
Excess of fair value over book value
|
$237,500
|
$190,000
|
$ 47,500
|
|
Adjustment of identi?able accounts:
|
|
|
|
|
|
|
Amortization
|
|
|
|
Adjustment
|
per Year
|
Life
|
|
Building
|
$ 50,000
|
$ 5,000
|
10
|
|
Goodwill
|
187,500
|
|
|
|
Total
|
$237,500
|
|
|
Brown Corporation reports net income of $35,000 for the six months ended July 1, 20X8.
Cecil's simple-equity-adjusted investment balance is $814,000 as of December 31, 20X7.
Prepare all entries for the sale of the Brown Corporation shares on July 1, 20X8, for each of the following situations:
1. 24,000 shares are sold for $850,000.
2. 12,000 shares are sold for $425,000.
3. 6,000 shares are sold for $212,500.