On January 1, Park Corporation and Strand Corporation had condensed balance shee
ID: 2337567 • Letter: O
Question
On January 1, Park Corporation and Strand Corporation had condensed balance sheets as follows: Park Strand Current assets $ 118250 $ 37000 Noncurrent assets 98,500 44,500 Total assets $ 216750 $ 81500 Current liabilities $ 50,250 $ 31500 Long-term debt 74,500 — Stockholders' equity 92,000 50,000 Total liabilities and equities $ 216,750 $ 81500 On January 2, Park borrowed $65,200 and used the proceeds to obtain 80 percent of the outstanding common shares of Strand. The acquisition price was considered proportionate to Strand’s total fair value. The $65,200 debt is payable in 10 equal annual principal payments, plus interest, beginning December 31. The excess fair value of the investment over the underlying book value of the acquired net assets is allocated to inventory (60 percent) and to goodwill (40 percent). On a consolidated balance sheet as of January 2, what should be the amount for noncurrent assets?
Explanation / Answer
What should be the amount for noncurrent assets?
Acquisition date Fair Value = $65,200 / 80%
= $ 81,500
Less: Strand’s Book Value (Net Assets or Stockholders) = ($ 50,000)
Fair value in excess of Book value = $ 31,500
Excess assigned to inventory (60%) = $ 18,900
Excess assigned to Goodwill (40%) = $ 12,600
Park noncurrent assets = $ 98,500
Add: Strand noncurrent assets = $ 44,500
Add: Excess Fair value to goodwill = $ 12,600
Equals: Consolidated Non-Current assets = $ 155,600