week 2
knohe_
2-7.docxProblem 2-6 (LO 3, 4, 5, 6) 100% purchase, goodwill, worksheet.
On December 31, 2015, Aron Company purchases 100% of the common stock of Shield Company for $450,000 cash. On this date, any excess of cost over book value is attributed to accounts with fair values that differ from book values. These accounts of Shield Company have the following fair values:
Cash
$ 40,000
Accounts receivable
30,000
Inventory
140,000
Land
45,000
Buildings and equipment
225,000
Copyrights
25,000
Current liabilities
65,000
Bonds payable
105,000
The following comparative balance sheets are prepared for the two companies immediately after the purchase:
Aron
Shield
Cash
$ 185,000
$ 40,000
Accounts receivable
70,000
30,000
Inventory
130,000
120,000
Investment in Shield Company
450,000
Land
50,000
35,000
Buildings and equipment
350,000
230,000
Accumulated depreciation
(100,000)
(50,000)
Copyrights
40,000
10,000
Total assets
$1,175,000
$415,000
Current liabilities
$ 192,000
$ 65,000
Bonds payable
100,000
Common stock ($10 par)—Aron
100,000
Common stock ($5 par)—Shield
50,000
Paid-in capital in excess of par
250,000
70,000
Retained earnings
633,000
130,000
Total liabilities and equity
$1,175,000
$415,000
Required
1. Prepare the value analysis schedule and the determination and distribution of excess schedule for the investment in Shield Company.
2. Complete a consolidated worksheet for Aron Company and its subsidiary Shield Company as of December 31, 2015.
Problem 2-7 (LO 3, 4, 5, 6, 7) 80% purchase, goodwill, worksheet.
Using the data given in Problem 2-6, assume that Aron Company purchases 80% of the common stock of Shield Company for $320,000 cash.
The following comparative balance sheets are prepared for the two companies immediately after the purchase:
Aron
Shield
Cash
$ 315,000
$ 40,000
Accounts receivable
70,000
30,000
Inventory
130,000
120,000
Investment in Shield Company
320,000
Land
50,000
35,000
Buildings and equipment
350,000
230,000
Accumulated depreciation
(100,000)
(50,000)
Copyrights
40,000
10,000
Total assets
$1,175,000
$415,000
Current liabilities
$ 192,000
$ 65,000
Bonds payable
100,000
Common stock ($10 par)—Aron
100,000
Common stock ($5 par)—Shield
50,000
Paid-in capital in excess of par
250,000
70,000
Retained earnings
633,000
130,000
Total liabilities and equity
$1,175,000
$415,000
Required
1. Prepare the value analysis and the determination and distribution of excess schedule for the investment in Shield Company.
2. Complete a consolidated worksheet for Aron Company and its subsidiary Shield Company as of December 31, 2015.
Use the following information for Problems 2-8 through 2-11:
In an attempt to expand its operations, Palto Company acquires Saleen Company on January 1, 2015. Palto pays cash in exchange for the common stock of Saleen. On the date of acquisition, Saleen has the following balance sheet:
Saleen Company
Balance Sheet
January 1, 2015
Assets
Liabilities and Equity
Accounts receivable
$ 20,000
Current liabilities
$ 40,000
Inventory
50,000
Bonds payable
100,000
Land
40,000
Common stock ($1 par)
10,000
Buildings
200,000
Paid-in capital in excess of par
90,000
Accumulated depreciation
(50,000)
Retained earnings
60,000
Equipment
60,000
Accumulated depreciation
(20,000)
Total assets
$300,000
Total liabilities and equity
$300,000
An appraisal provides the following fair values for assets:
Accounts receivable
$ 20,000
Inventory
60,000
Land
80,000
Buildings
320,000
Equipment
60,000
Copyright
50,000
