21. On December 31, 2016, Parent Company purchased 80% of the common stock of Su

Question

21. On December 31, 2016, Parent Company purchased 80% of the common stock of Subsidiary Company for $280,000. On this date, Subsidiary had total owners' equity of $250,000 (common stock $20,000; other paid-in capital, $80,000, and retained earnings, $150,000). Any excess of cost over book value is due to the under or overvaluation of certain assets and liabilities. Inventory is undervalued $5,000. Land is undervalued $20,000. Buildings and equipment have a fair value which exceeds book value by $30,000. Bonds payable are overvalued $5,000. The remaining excess, if any, is due to goodwill. Required a. Prepare a value analysis schedule for this business combination. b. Prepare the determination and distribution schedule for this business combination

Explanation / Answer

Part a)

The value analysis schedule for the business combination is provided as below:

_____

Part b)

The determination and distribution schedule for the business combination is provided as follows:

_____

Part c)

The necessary elimination entries are given as below:

Value Analysis Schedule Company Implied Fair Value Parent Price NCI Value Company Fair Value 350,000 280,000 70,000 Fair Value Identifiable Net Assets 310,000 248,000 62,000 Goodwill 40,000 32,000 8,000

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