On January 1, 2019, Perry Company purchased 8,000 shares of Soho Company's common stock for $120,000. Immediately after the stock acquisition, the statements of financial position of Perry and Soho appeared as follows:
Question: Suppose instead that Perry acquired the 8,000 shares for $20 per share including a $5 per share control premium. Prepare a computation and allocation of difference schedule.
Homework Answers
| Soho Common Stock | 10,000 | ||
| ($100,000 / $10 par value) | |||
| Perry purchased | 80% | ||
| (8,000/10,000) | |||
| Perry purchased the | $190,000 | ||
| 80% i.e.(8,000 shares x $20) + remaining 2,000 shares x $65 | |||
| Parent Share (Perry) 80% | Non-Controlling Share 20% | Total Value | |
| Purchase price and implied value | 160,000 | 30,000 | 190,000 |
| Less: Book value of equity acquired: | |||
| Common Stock | 80,000 | 20,000 | 100,000 |
| Other Contributed capital | 13,200 | 3,300 | 16,500 |
| Retained Earnings | 18,800 | 4,700 | 23,500 |
| Total Book Value | 112,000 | 28,000 | 140,000 |
| Difference between implied and book value | 48,000 | 2,000 | 50,000 |
| Plant Assets | (48,000) | (2,000) | (50,000) |
| Balance | - | - | - |
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