ACT4491 CH02 Exercises FA08

ACT4491 CH02 Exercises FA08 - Combination after Acquisition...

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Combination after Acquisition
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EXERCISE 2-1 Solara Corporation Pro Forma Income Statement Ownership Levels 10% 20% 70% Sales. ...................................................................... $640,000 $640,000 $1,010,000 Cost of goods sold . ................................................. 300,000 300,000 530,000 Gross profit . ............................................................ $340,000 $340,000 $ 480,000 Selling and administrative expenses . ...................... 120,000 120,000 195,000 Operating income. ................................................... $220,000 $220,000 $ 285,000 Dividend income (10% × $15,000 dividends) . ......... 1,500 Investment income (20% × $65,000 reported income). ............................................................ 13,000 Net income. ............................................................. $221,500 $233,000 $ 285,000 Noncontrolling interest (30% × $65,000 reported income). ............................................................ 19,500 Controlling interest. ................................................. $ 265,500
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EXERCISE 2-2 Company Parent NCI Implied Price Value Value Analysis Schedule Fair Value (100%) (0%) Company fair value. ................................................ $530,000 $530,000 N/A Fair value of net assets excluding goodwill ($280,000 book value + $20,000). .................... 300,000 300,000 Goodwill. ................................................................. $230,000 $230,000 1. (a) Cash. ............................................................................... 20,000* Accounts Receivable. ...................................................... 70,000 Inventory. ......................................................................... 100,000 Property, Plant, and Equipment ($270,000 + $20,000) . ... 290,000 Goodwill . ......................................................................... 230,000 Current Liabilities. ...................................................... 80,000 Bonds Payable. .......................................................... 100,000 Cash. ......................................................................... 530,000* *Cash may be shown as a net credit of $510,000.
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Exercise 2-2, Concluded (b) Glass Company Balance Sheet Assets Current assets: Cash. .............................................................. $ 30,000 Accounts receivable. ....................................... 120,000 Inventory. ........................................................ 150,000 $ 300,000 Property, plant, and equipment (net). .................... 520,000 Goodwill . .............................................................. 230,000 Total assets. ......................................................... $1,050,000 Liabilities and Stockholders’ Equity Liabilities: Current liabilities . ............................................ $220,000 Bonds payable. ............................................... 350,000 $ 570,000 Stockholders’ equity: Common stock ($100 par). .............................. $200,000
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This note was uploaded on 06/15/2011 for the course ACT 4491 taught by Professor Magrath during the Spring '11 term at Troy.

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ACT4491 CH02 Exercises FA08 - Combination after Acquisition...

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