Question

7-On January 1, 2015, Shea Corporation acquired all of the outstanding common stock of Sophia's Stuff, Inc. for $2,500,000 cash. The excess of the acquisition price over book value of Sophia's Stuff's stockholders' equity consisted of the following: Equipment, 8-year life, overvalued by $400,000 Building, 10-year life, undervalued by $65,000 Goodwill, indefinite life, $240,000 Required: a. Compute the amount of the excess that will be allocated to building after completion of the December 31, 2018, consolidation worksheet. b. Compute the amount of the excess that will be allocated to equipment after completion of the December 31, 2018, consolidation worksheet.

Answer 1

7-Jan-15 overvalued building undervalued building life 400,000 65000 8 years 10 years amount written off each year 400,000/8 65000/10 date amount written off, building amount written off, equipment remaining value, building remaining value, equipment 31-Dec-15 31-Dec-16 31-Dec-17 31-Dec-18 50000 50,000 50,000 50,000 6500 6500 6500 6500 350000 300,000 250,000 200,000 58500 52000 45500 39000 a. $200,000 would be reported as excess of building on december, 31 2018 $39000 would be reported as excess of equipment on december 31 2018 b.

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