Question

On January 1, 20X9, Parker acquired 90% of Sanders for $200,000 plus $15,000 in acquisition costs. On the date of acquisition, Sanders had the following balance sheet Sanders Company Balance Sheet January 1, 20x9 Assets Liabilities and Equity Accounts Receivable $40,000 Current Liabilities $110,000 100,000 100,000 Inventory 160,000 Bonds Payable 60,000 Common Stock, $1 par 150,000 Paid-in Capital (20,000) Retained Earnings 50,000 (10,000) 30,000 $460,000 Total Liabilities and Equity Land Buildings Accumulated Depreciation Equipment Accumulated Depreciation Goodwill Total Assets 50,000 100,000 $460000 An appraisal indicates that the following items have fair values that differed from their book values: Accounts Receivable $30,000 180,000 80,000 100,000 Inventory Land Buildings Equipment Copyright Bonds Payable 30,000 70,000 105,000 Immediately after the purchase, Parker had the following balance sheet: Parker Company Balance Sheet January 1, 20x9 Liabilities and Equity Assets $120,000 190,000 100,000 40,000 400,000 Cash $50,000 Current Liabilities 60,000 Bonds Payable 100,000 Common Stock, $1 par 200,000 Paid-in Capital 200,000 Retained Earnings 240,000 (50,000) 90,000 (40,000) 100,000 $950,000 Total Liabilities and Equity Accounts Receivable Inventory Investment in Sanders Land Buildings Accumulated Depreciation Equipment Accumulated Depreciation Goodwill to alsb 950.000 Total Assets INSTRUCTIONS (1) Record the investment in Sanders. (2) Prepare a value analysis schedule. (3) Prepare a determination and distribution of excess schedule. (4) Prepare all required elimination entries for the January 1,20X9 consolidated worksheet in general journal format. (5) Complete a consolidated worksheet for Parker and its subsidiary Sanders as of January 1, 20X9. (6) Prepare a consolidated balance sheet in good form as of January 1, 20x9.

Answer 1

1) Investment in Sander for purchasing  of common stock, Parker Amounting to $ paid 200000 along with $15000 for acquisition cost. Total Investment to Parker $ 2,15,000.00. to find out investment value to compare of sandal's Book Value ( Market Value).

2) Value Analysis Schedule in the case of sander

Company Implied Fair Value 90% 10%

Company Book Value (Total Assets- Total Liability)   

(460,000-210,000) 250,0000    225,000 22,500

Fair Value Net Identify Assets ( 490,000-215000) 275,000 247,500 27,500

Capital Reserve 25,000 22,500 2,500

Total Capital Reserve 25000 in case of Value analysis

3) Distribution and Determination of Excess Schedule 90% of Parker 22,500 and 2500 in Minority interest in sander common stock holder.

4. Journal Entry

date Particular debit credit

01/01/2018 Investment in Sander 576,000

To Cash 215,000

To Capital Reserve 361,000

(Share Purchase)

01/01/2018 Capital Reserve 25,000   

To Goodwill 25,000

      

(Goodwill W/o)

5. Cost Of Control

Investment in Sander (In The Books Show) 200,000

Less : Common stock ($ 1 par) 90000

Less: Additional Paid up Capital 45000

Less: Retained Earning (Pre Acquistion Profit) 900000 225,000

Capital Reserve    25,000

Minority Interest

(Common Stock+ Additional Paid up Capital + Retained Earning) *10%

(100000+ 50000+ 100000) *10% = $ 25,000

Parker Ltd Consolidated Balance Sheet as on 01 Jan 2018 Liability and Equity Share Amount Holder Assets Amount Current Assets Cash Current Liability 50000 230000 Account Receiable 100000 Bonds Payable 290000 Inventories 260000 410000 Common Stock ($ 1 Per 100000 225000 Additioal Paid up Capita Retained Earning Investment 140000 400000 Fixed Assets 260000 Land 165000 Building Minority Interest 25000 Less: Acc. Dep 70000 95000 140000 Equipment -50000 90000 Less: Acc. Dep Goodwill 105000 1185000 1185000