Consolidated Balance Sheet Workpaper On January 1, 2011, Perry Company purchased
ID: 2725941 • Letter: C
Question
Consolidated Balance Sheet Workpaper On January 1, 2011, Perry Company purchased 8,000 shares of Soho Companys common stock for $120,000. Immediately after the stock acquisition, the statements of financial position of Perry and Soho appeared as follows: Assets Perry Soho Cash $ 39,000 $ 19,000 Accounts receivable 53,000 31,000 Inventory 42,000 25,000 Investment in Soho Company 120,000 Plant assets 160,000 110,500 Accumulated depreciationplant assets (52,000) (19,500) ` Total $362,000 $166,000 Liabilities and Owners Equity Current liabilities $ 18,500 $ 26,000 Mortgage notes payable 40,000 Common stock, $10 par value 120,000 100,000 Other contributed capital 135,000 16,500 Retained earnings 48,500 23,500 ` Total $362,000 $166,000 LO8 LO9 LO8 LO9 Copyright 2012 John Wiley & Sons, Inc. Problems 143 Required: A. Calculate the percentage of Soho acquired by Perry Company. Prepare a schedule to compute the difference between book value of equity and the value implied by the purchase price. Any difference between the book value of equity and the value implied by the purchase price relates to subsidiary plant assets. B. Prepare a consolidated balance sheet workpaper as of January 1, 2011. C. Suppose instead that Perry acquired the 8,000 shares for $20 per share including a $5 per share control premium. Prepare a computation and allocation of difference schedule.
Explanation / Answer
Perry Company and Subsidiary Soho Consolidated Balance Sheet Workpaper Jan 1,2011 Eliminations Perry Company Soho company Debit Credit Noncontrolling Interest Consolidated Balance Cash $ 39,000.00 $ 19,000.00 $ 58,000.00 Accounts Receivable $ 53,000.00 $ 31,000.00 $ 84,000.00 Inventory $ 42,000.00 $ 25,000.00 $ 67,000.00 Investment in Soho $ 120,000.00 $ 120,000.00 Difference between implied and book value $ 10,000.00 $ 10,000.00 Plants Assets $ 160,000.00 $ 110,500.00 $ 10,000.00 $ 280,500.00 Accumulated Depreciation $ (52,000.00) $ (19,500.00) $ (71,500.00) Total $ 362,000.00 $ 166,000.00 $ 418,000.00 Current Liabilities $ 18,500.00 $ 26,000.00 $ 44,500.00 Mortgage Notes Payable $ 40,000.00 $ 40,000.00 Common Stock $ - Perry Company $ 120,000.00 $ 120,000.00 Soho Company $ 100,000.00 $ 100,000.00 Other Contributed capital $ - Perry Company $ 135,000.00 $ 135,000.00 Soho Company $ 16,500.00 $ 16,500.00 Retained Earnings $ - Perry Company $ 48,500.00 $ 48,500.00 Soho Company $ 23,500.00 $ 23,500.00 Non controlling Interest $ 30,000.00 $ 30,000.00 $ 30,000.00 Total $ 362,000.00 $ 166,000.00 $ 160,000.00 $ 160,000.00 $ 30,000.00 $ 418,000.00 Total Number of Soho shares @ 10 each 10000 8000 shares acquired out of 10,000 shares 0.8 Imlied value of soho 150000 Implied value on non controlling shares 30000 Present share Non controlling shares Entire value Purchase Price 120000 30000 150000 Less: Book Value of Equity Common Stock 80000 20000 100000 Other Contributed Capital 13200 3300 16500 Retained Earning 18800 4700 23500 Total Book Value 112000 28000 140000 Diffrence between implied and book value 8000 2000 10000 Plant Assets -8000 -2000 -10000 Balance 0 0 0