EXERCISE 2-5

(1)
Value Analysis Schedule
Company fair value ..........................................
Fair value of net assets excluding goodwill ......
Goodwill
Gain on acquisition ..........................................

Company
Implied
Fair Value

Parent
Price
(100%)

$ 700,000
885,000

$ 700,000
885,000

$(185,000)

$(185,000)

Determination and Distribution of Excess Schedule

Company
Implied
Fair Value
Price paid for investment ..........
Less book value of interest acquired:
Common stock ($5 par) .........
Paid-in capital in excess of par
Retained earnings .................
Total equity ........................
Interest acquired ....................
Book value ................................
Excess of fair value over book
value ......................................

$700,000
$200,000
300,000
175,000
$675,000

$ 25,000

Parent
Price
(100%)

NCI
Value
(0%)

$700,000

N/A

$675,000
100%
$675,000
$ 25,000

NCI
Value
(0%)
N/A

Exercise 2-5, Concluded

Adjustment of identifiable accounts:

Inventory ($215,000 fair

$200,000 book value) ............
Property, plant, and equipment
($700,000 fair $500,000
book value) ............................
Computer software ($130,000
fair $125,000 book value) ...
Premium on bonds payable
($200,000 fair $210,000
book value) ............................
Gain on acquisition ...................
Total ..................................

Adjustment

Worksheet
Key

$ 15,000

debit D1

200,000

debit D2

5,000

debit D3

(10,000)
(185,000)
$ 25,000

credit D4
credit D5

(2) Elimination entries:

Common Stock ($5 par)Genall ............................................
Paid-In Capital in Excess of ParGenall ................................
Retained EarningsGenall.....................................................
Investment in Genall Company ...........................................

200,000
300,000
175,000

Inventory .................................................................................
Property, Plant, and Equipment ..............................................
Computer Software .................................................................
Gain on Acquisition.............................................................
Premium on Bonds Payable ...............................................
Investment in Genall Company ...........................................

15,000
200,000
5,000

675,000

185,000
10,000
25,000