Question

10. On January 1, 2020, Parots & Parties Company purchased all of the common stock of Sunshine Company for $850,000 cash. On that date, Sunshine had common stock of $60,000, additional paid-in capital of $360,000, and retained earnings of $300,000. The difference between the cost of the purchase and the book value of Sunshine's net assets was at least partly due to under or overvalued assets and liabilities. Inventory was undervalued by $10,000. Land was undervalued by $70,000. Buildings and Equipment were undervalued by $18,000. Bonds Payable was overvalued by $15,000. Any unexplained difference is due to Goodwill. Required: Prepare all necessary entries for a January 1, 2020, consolidated balance sheet

Answer 1

Answer:

Common stock 60,000 Additional paid-in capital Retained earnings 360,000 300,000 BCVR-inventories 10,000 BCVR-land 70,000 BCVR-building and equipment BCVR-bonds payable 18,000 15,000 $ Net fair value of identifiable assets & liabilities 833,000 Consideration transferred 850,000 Goodwill 17,000 %24 %24

Inventories 10,000 Business combination valuation reserve(BCVR) 10,000 Land 70,000 Business combination valuation reserve 70,000 Building and equipment 18,000 Business combination valuation reserve 18,000 Bonds payable 15,000 Business combination valuation reserve 15,000 Goodwill 17,000 Business combination valuation reserve 17,000 Common stock Additional paid-in capital Retained earnings 60,000 360,000 300,000 Business combination valuation reserve 130,000 Shares in Sunshine Company 850,000