Question

Venus Corporation purchases 70% of the common stock of Starnes Company for $700,000. At the time of purchase, Starnes has the following balance sheet: Starnes Company Balance Sheet December 31, 2019 90,000 300,000 Assets Cash equivalents Inventory Land Building (net) Equipment (net) Total Assets Liabilities and Equity 110,000 Accounts Payable 200,000 Bonds Payable 80,000 Stockholder's Equity 400,000 Common Stock ($5 par) 210,000 Paid-in Capital in excess of par Retained Earnings 1,000,000 Total Liabilities and Equity 100,000 160,000 350,000 1,000,000 The fair value of the assets are as follows: Fair Value Cash equivalents 110,000 Inventory 220,000 Land 120,000 Building 480,000 Equipment 190,000 730,000 Required: 1. Prepare the value analysis schedule and the determination and distribution of excess schedule for the investment in Starnes Company. 2. Prepare the elimination entries that would be made on a consolidation worksheet prepared on the date of purchase.

Answer 1

Solution ? P. Nol As per information about the Starnes Company Balance sheet as on December 31, 2019, Book value fais value 110,000 110,000 200,000 220,000 80,000 120,000 Cash equivalente Inventory land Building Equipment less: Accounts payable Bonds payable 400,000 480,000 210,000 190,000 -90,000 –90,000 - 300,000 - 300,000 610,000 730,000 parent NCI value analysis Company fair value fair value of net assets 919,000 700,000 219,000 730,000 511,000 219,000

P.2 Goedevil 189,000 Gain on 189,000 acquisition Determination and distribution of excess Schedule parent NCI fair value of subsidi +30,000 511,000 ary 219,000 less Book value of interest acquired Common Stock 100,000 paid in access 160,000 Retained earnings | 350,000 Total equity 610,000 | Enterest acquires 70% 30.1. Book value Excees of fais 190,000 84,000 360,000 value over book value

23 Adjustment of identifiable accounts Account Aljustment Worksheet Kay debit di 20,000 debit de debitd; Cash equivalens Einventory land Building Equipment Total 40,000 80,000 debit dy - 20,000 debit do 120,000 Elimination entries Debit Credot Common Stock 100,000 paid in Capital excees of par 160,000 Retained earnings 350,000 Difference (Cost & book) 309,000 To investment in starnes non controlling interest 700,ooo TO 319,000

P.4 20,000 40,000 Inventory land Building Good will 80,000 189,000 20000 ( To equipment to Difference (Cost & book) 309,000 please, vote positively