Pool Industries paid $540,000 to purchase 75% of the outstanding stock of Swimmi
ID: 2488207 • Letter: P
Question
Pool Industries paid $540,000 to purchase 75% of the outstanding stock of Swimmin’ Corporation, on December 31, 2014. Any excess fair value over the identified assets and liabilities is attributed to goodwill. The following year-end information was available just before the purchase:
Pool Swimmin’ Swimmin’
Book Book Fair
Value Value Value
Cash $756,000 $80,000 $80,000
Accounts receivable 260,000 152,000 152,000
Inventory 480,000 100,000 120,000
Land 440,000 160,000 140,000
Plant and equipment-net 1,320,000 400,000 430,000
$3,256,000 $892,000 $922,000
Accounts payable $880,000 $22,000 $22,000
Bonds payable 936,000 200,000 180,000
Capital stock, $10 par value 400,000
Capital stock, $15 par value 450,000
Additional paid-in capital 400,000 160,000
Retained earnings 640,000 60,000
$3,256,000 $892,000
Prepare Pool's consolidated balance sheet on December 31, 2014.
Explanation / Answer
investment in swimmin
pool industry purchased 75% interest in swimmin corporation for $540,000 Implied fair value of swimmin = $540,000 * 100/75 $720,000 Fair value of swimmin net assets $720,000 since the amount paid for purchase of investment is equal to the fair vlaue of the assets in the subsidary company , hence there is no excess fair value pool swimmin debit amount credit amount consolidated balance sheet amount cash $216,000 $80,000 $ 296,000 accounts recievable 260,000 152,000 412,000 inventory 480,000 100,000 20,000 600,000 land 440,000 160,000 20,000 580,000 plant & equip 1,320,000 400,000 30,000 1,750,000investment in swimmin
540,000 540,000 0 total assets 3,256,000 892,000 3,638,000 accounts payable 880,000 22,000 902,000 bonds payable 936,000 200,000 20,000 1,116,000 capital stock 400,000 450,000 450,000 400,000 addittional paid up capital 400,000 160,000 160,000 400,000 retained earnings 640,000 60,000 60,000 640,000 non controlling interest 180,000 total equity 3,256,000 $892,000 $3,638,000 $740,000 $740,000