Question

Exercise 5-3 Pace Company purchased 20,000 of the 25,000 shares of Saddler Corporation for $522,100. On January 3, 2014, the acquisition date, Saddler Corporation's capital stock and retained earnings account balances were $494,200 and $98,500, respectively. The following values were determined for Saddler Corporation on the date of purchase: Inventory Other current assets Marketable securities Plant and equipment Book Value $49,700 201,500 100,800 295,400 Fair Value $69,000 201,500 126,500 326,700

Answer 1

CONSOLIDATED STATEMENT WORK-PAPER
Computation and Allocation Schedule for difference between Book Value and Value Implied by Purchase Price
	Parent Share	Non-Controlling Share	Entire Value
Purchase Price and Implied Value	$522,100	$130,525	$652,625
Less: Book Value of Equity Acquired	$474,160	$118,540	$592,700
Difference between Implied and Book Value	$47,940	$11,985	$59,925
Inventory	$15,440	$3,860	$19,300
Marketable Securities	$20,560	$5,140	$25,700
Plant and Equipment	$25,040	$6,260	$31,300
Balance	($13,100)	($3,275)	($16,375)
Gain	$13,100
Increase Non-controlling interest to Fair Value of Assets		$3,275
Total Allocation Bargain			$16,375
Balance	$0	$0	$0
Working Notes
Allocation of Book Value of Equity Acquired
	Entire Value	Parent Share @ 80%	Non-Controlling Share @ 20%
Book Value of Equity Acquired
Capital Stock	$494,200	$395,360	$98,840
Retained Earnings	$98,500	$78,800	$19,700
	$592,700	$474,160	$118,540
Excess of Fair Value over Book Value of Assets
	Fair Vale	Book Value	Excess
Inventory	$69,000	$49,700	$19,300
Marketable Securities	$126,500	$100,800	$25,700
Plant and Equipment	$326,700	$295,400	$31,300
Other Current Assets	$210,500	$210,500	$0
	$732,700	$656,400	$76,300
Allocation of excess of Fair Value of Assets to Parent & Non-Controlling Share
	Excess of Fair Value	Parent Share @ 80%	Non-Controlling Share @ 20%
Inventory	$19,300	$15,440	$3,860
Marketable Securities	$25,700	$20,560	$5,140
Plant and Equipment	$31,300	$25,040	$6,260
	$76,300	$61,040	$15,260