Question

Problem 3 Pennington Corporation purchased 80% of the votine common stock of Stafford Corporation for $3,200,000 cash on January 1, 2016. On this date the book values and fair values of Stafford Corporation's assets and liabilities were as follows: Book Value Fair Value Cash $ 70,000 $ 70,000 Receivables 240,000 240,000 Inventories 600,000 700.000 Other Current Assets 340.000 405,000 Land 600,000 720,000 Buildings -net 1,050,000 1.920,000 Equipment - net 850,000 750,000 $3.750,000 $4.805.000 $250,000 670.000 Accounts Payable Other Liabilities Capital Stock Retained Earnings $ 250,000 740,000 2,400,000 360,000 $3,750,000 Required Prepare a schedule showing how the difference between Stafford Corporation's implied value and the book value of the net assets acquired should be allocated.

Answer 1

Solution:

	Parent share	Non-controlling share	Entire value
Purchase price and implied value	3,200,000	800,000	4,000,000
Less: Book value of equity acquired	2,208,000	552,000	2,760,000
Difference between implied and book value	992,000	248,000	1,240,000
Inventories	-80,000	-20,000	-100,000
Other Current assets	-52,000	-13,000	-65,000
Land	-96,000	-24,000	-120,000
Buildings (net)	-696,000	-174,000	-870,000
Other liabilities	-56,000	-14,000	-70,000
Equipment (net)	80,000	20,000	100,000
Balance	92,000	23,000	115,000
Goodwill	-92,000	-23,000	-115,000
Balance	0	0	0