Part1COMBINED CORPORATE ENITTIES AND CONSOLIDATIOu Exercise 7 aos6, 7, 8)80% pur
ID: 2335357 • Letter: P
Question
Part1COMBINED CORPORATE ENITTIES AND CONSOLIDATIOu Exercise 7 aos6, 7, 8)80% purchase witha gain and preexisting goodwill. Venus Company purchases 8,000 shares of Sundown Company for $64 per share. Just prior to the 102 purchase, Sundown Company has the following balance sheet Liabilities and Equity Assets $250,000 Cash Inventory Prope,plant,ond equipmentnet) 00,000 P 50,000 130,000 370,000 $800,000 Total liabilities and equity $800,00 280,000 Common stock($5 par).50 Paid-in capital in excess of par 100,000 Retained earnings7 Goodwill.. otl assets. Venus Company believes that the inventory has a fair value of $ $40,000 and that the pu erty plant,and equipment is worth $500,000 2. Prepare the eimination entis that would be made on a consolidated worksheet P Exercise8(LO 1, 5,6, 7,8)Prior inves 1. Prepare the value analysis schedule and the determination and distributipreparcd on the date of acquisition ion of excess Corporation purchased a 10%; for-sale invesmExplanation / Answer
1) Value Analysis Schedule Company Implied Value Parent Price (80%) NCI Value (20%) Company fair value $646,000.00 $512,000.00 $134,000.00 Fair value of net assets excluding goodwill $670,000.00 $536,000.00 $134,000.00 Gain on acquisition -$24,000.00 -$24,000.00 $0.00 Parent Price = 8000 x $64 $512,000.00 Fair value of the net assets excluding goodwill = $400,000 + $500,000 + $20,000 - $250,000 $670,000.00 NCI Value = $670,000 x 20% $134,000.00 Determination and Distribution of Excess Schedule Company Implied Value Parent Price (80%) NCI Value (20%) Company fair value $646,000.00 $512,000.00 $134,000.00 Less : book value of interest acquired: Common stock ($5 par) $50,000.00 Paid-in capital in excess of par $130,000.00 Retained earnings $370,000.00 Total Equity $550,000.00 $550,000.00 $550,000.00 Interest acquired 80.00% 20.00% Book value $440,000.00 $110,000.00 Excess of fair value over book value $96,000.00 $72,000.00 $24,000.00 2) Elimination entries: Debit Credit Common stock ($5 par) = 50000 x 80% $40,000.00 Paid-in capital in excess of par = $130,000 x 80% $104,000.00 Retained earnings = $370,000 x 80% $296,000.00 Investment in Sundown Company $440,000.00 Inventory ($400,000 fair – $280,000 book value) $120,000.00 Property, Plant, and Equipment ($500,000 fair – $400,000 book value) $100,000.00 Goodwill ($0 fair – $100,000 book value) $100,000.00 Gain on Acquisition (Venus retained earnings) $24,000.00 Investment in Sundown Company (excess remaining) $72,000.00 Noncontrolling Interest (to adjust to fair value) $24,000.00