Yankee Corporation acquired 80% of the outstanding stock of Gary Corporation in December 31, 2019 for...
| Yankee Corporation acquired 80% of the outstanding stock of Gary Corporation in December 31, 2019 for $735,000 cash. The acquisition occurred on the last day of the fiscal year for both companies. Yankee paid an additional $15,000 in direct acquisition costs to consumate the purchase. The following balance sheet of the parent and subsidiary were prepared immediately subsequent to the investment: | |||
| Yankee | Gary | ||
| Cash | $115,000 | $60,000 | |
| Accounts receivable | 290,000 | 160,000 | |
| Inventory | 520,000 | 80,000 | |
| Land | 1,000,000 | 100,000 | |
| Building (net) | 700,000 | 230,000 | |
| Equipment (net) | 1,500,000 | 400,000 | |
| Investment in Gary | 750,000 | ||
| Goodwill | ------- | ------- | |
| Current liabilities | $500,000 | $850,000 | |
| Bond Payable | 400,000 | ||
| Common stock ($1par) | 600,000 | 100,000 | |
| Paid-in-capital in excess of par | 1,400,000 | 110,000 | |
| Retained earnings | 2,375,000 | 335,000 | |
| Total | $ - | $ - | |
| On the purchase date some of Gary Corporation's assets were recorded at book value, not consistent with fair value. The following fair values were obtained | |||
| Inventory | $120,000 | ||
| Land | 185,000 | ||
| Buildings | 350,000 | ||
| Equipment | 465,000 | ||
| Instructions: | |||
| 1. Prepare a zone analysis | |||
| Group Total | Ownership Portion | Cumulative Total | |
| Priority accounts | |||
| Nonpriority accounts | |||
| Price Analysis: | |||
| Price paid (including any direct acquisition costs) | |||
| Assign to priority accounts, controlling share | |||
| Assign to nonpriority accounts, controlling share | |||
| Extraordinary gain | |||
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