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13 - SPECIAL APPENDIX CHAPTER 1 EXERCISES EXERCISE SA1-1...

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SPECIAL APPENDIX CHAPTER 1 EXERCISES EXERCISE SA1-1 Value analysis: Price paid ..................................................................................... $400,000 Total fair value of net assets ........................................................ 528,000 Goodwill ....................................................................................... n/a Gain .............................................................................................. 128,000 Journal entry: Currents Assets ........................................................................... 120,000 Land (fair value) ........................................................................... 80,000 Buildings (net) (fair value) ............................................................ 250,000 Equipment (net) (fair value) ......................................................... 150,000 Patents (fair value) ....................................................................... 20,000 Cash ....................................................................................... 400,000 Liabilities (fair value) .............................................................. 92,000 Gain on Purchase .................................................................. 128,000 Dr = Cr check amounts ................................................................ 620,000 620,000 Acquisition Expense* ................................................................... 23,000 Cash ....................................................................................... 23,000 *$18,000 direct + $5,000 indirect 61
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PROBLEMS PROBLEM SA1-1 Purchase price: Part 1 Part 2 Cash ............................................................................................. $385,000 Number of shares exchanged ..................................................... 20,000 Par value of a share of stock ....................................................... $10 Market value of a share of stock .................................................. $25 Market value of stock exchanged ................................................ $500,000 Total purchase price .................................................................... $500,000 $385,000 Value analysis: Price paid ..................................................................................... $500,000 $385,000 Fair value of net assets ................................................................ 420,000 420,000 Goodwill ....................................................................................... 80,000 n/a Gain .............................................................................................. n/a 35,000 Kent Corporation journal entries: (1) Accounts Receivable ................................................................... 50,000 Inventory ...................................................................................... 250,000 Land ............................................................................................. 40,000 Building ........................................................................................ 120,000 Goodwill ....................................................................................... 80,000 Accounts Payable .................................................................. 40,000 Common Stock ...................................................................... 200,000 Paid-In Capital in Excess of Par ............................................ 300,000 (2) Accounts Receivable ................................................................... 50,000 Inventory ...................................................................................... 250,000 Land ............................................................................................. 40,000 Building ........................................................................................ 120,000 Accounts Payable .................................................................. 40,000 Gain on Purchase .................................................................. 35,000 Cash ....................................................................................... 385,000 62
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CHAPTER 2 EXERCISES EXERCISE SA2-1 (1) Value Analysis Schedule Parent Price NCI Company Value Company fair value .............................................. 720,000 180,000 900,000 Fair value of net assets excluding goodwill ......... 656,000 164,000 820,000 Goodwill ............................................................... 64,000 16,000 80,000 Gain ...................................................................... n/a Determination and Distribution of Excess Schedule Company Parent NCI Worksheet Value Price Value Distribution Fair value of subsidiary: 900,000 720,000 180,000 Less book value interest acquired: Common stock, $5 par ....................... 100,000 Paid-in excess of par ......................... 150,000 Retained earnings .............................. 250,000 Total equity ................................... 500,000 Interest acquired ................................ 80.00% 20.00% Book value ............................................... 400,000 100,000 Excess of cost over book value (debit) .... 400,000 320,000 80,000 Adjustment of identifiable accounts: Inventory ($300,000 fair – $200,000 book value) ......................................... 100,000 0 debit D1 Land ($200,000 fair – $100,000 book value) ......................................... 100,000 0 debit D2 Building ($600,000 fair – $450,000 book value) ......................................... 150,000 debit D3 Equipment ($200,000 fair – $230,000 book value) ......................................... (30,000) credit D4 Goodwill .................................................. 80,000 debit D5 Total ................................................... 400,000 63
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Exercise SA2-1, Concluded (2) Elimination entries: Common Stock ($5 par, 80%) ..................................................... 80,000 Paid-In Capital in Excess of Par (80%) ....................................... 120,000 Retained Earnings (80%) ............................................................. 200,000 Investment in Cooker Company ............................................ 400,000 Inventory ...................................................................................... 100,000 Land ............................................................................................. 100,000 Building ........................................................................................ 150,000 Goodwill ....................................................................................... 80,000 Equipment .............................................................................. 30,000 Investment in Cooker Company (excess remaining) ............ 320,000 Noncontrolling Interest (RE) (to adjust to fair value) ............. 80,000 EXERCISE SA2-2 (1) Value Analysis Schedule Parent Price NCI Company Value Company fair value .............................................. 656,000 164,000 820,000 Fair value of net assets excluding goodwill ......... 536,000 134,000 670,000 Goodwill ............................................................... 120,000 30,000 150,000 Gain ...................................................................... n/a Determination and Distribution of Excess Schedule Company Parent NCI Worksheet Value Price Value Distribution Fair value of subsidiary: 820,000 656,000 164,000 Less book value interest acquired: Common stock, $5 par ....................... 50,000 Paid-in excess of par ......................... 130,000 Retained earnings .............................. 370,000 Total equity ................................... 550,000 Interest acquired ................................ 80.00% 20.00% Book value ............................................... 440,000 110,000 Excess of cost over book value (debit) .... 270,000 216,000 54,000 Adjustment of identifiable accounts: Inventory ($400,000 fair – $280,000 book value) ......................................... 120,000 0 debit D1 Property, plant, and equipment ($500,000 fair – $400,000 book value) ............... 100,000 0 debit D2 Goodwill ($150,000 fair – $100,000 book value) ......................................... 50,000 debit D3 Total ................................................... 270,000 64
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Exercise SA2-2, Continued (2) Elimination entries: Common Stock ($5 par, 80%) ..................................................... 40,000 Paid-In Capital in Excess of Par (80%) ....................................... 104,000 Retained Earnings (80%) ............................................................. 296,000 Investment in Saturn Company ............................................. 440,000 Inventory ...................................................................................... 120,000 Property, Plant, and Equipment ................................................... 100,000 Goodwill ....................................................................................... 50,000
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