Problem 1-1 P.

42

Purchase Price of $540,000

Value Analysis
Total Price Paid 540,000
Total Fair Value of Net Assets
Accounts receivable 79,000
Inventory 98,000
Other current assets 55,000
Equipment 340,000
Trademark 30,000
In-process R&D 20,000
Current liabilities (125,000)
Bonds payable (100,000)

Total Fair Value of Net Assets 397,000

Goodwill 143,000
Gain on Purchase of Business

Entry
Account Name Debit Credit
Accounts receivable 79,000
Inventory 98,000
Other current assets 55,000
Equipment 340,000
Trademark 30,000
In-process R&D 20,000
Goodwill 143,000
Cash 540,000
Current liabilities 125,000
Bonds payable 100,000
Purchase Price of $350,000
Value Analysis
Total Price Paid 350,000
Total Fair Value of Net Assets
Accounts receivable 79,000
Inventory 98,000
Other current assets 55,000
Equipment 340,000
Trademark 30,000
In-process R&D 20,000
Current liabilities (125,000)
Bonds payable (100,000)

Total Fair Value of Net Assets 397,000

Goodwill
Gain on Purchase of Business (47,000)

Entry
Account Name Debit Credit
Accounts receivable 79,000
Inventory 98,000
Other current assets 55,000
Equipment 340,000
Trademark 30,000
In-process R&D 20,000
Cash 350,000
Current liabilities 125,000
Bonds payable 100,000
Gain on Acquisition of Business 47,000
Problem 1-2

Vicker
Value Analysis
Total Price Paid 1,200,000
Total Fair Value of Net Assets
Accounts receivable 200,000
Inventory 190,000
Land 300,000
Building 450,000
Accumulated depreciation (150,000)
Current liabilities (160,000)
Bonds payable (90,000)
Others

Total Fair Value of Net Assets 740,000

Goodwill 460,000
Gain on Purchase of Business

Entry
Account Name Debit Credit
Accounts receivable 200,000
Inventory 190,000
Land 300,000
Building 450,000
Goodwill 460,000
Accumulated depreciation 150,000
Current liabilities 160,000
Bonds payable 90,000
Common stock 300,000
Paid-in capital in excess of par 900,000

Acquisition Expense - Vicker 5,000

Cash 5,000

Registration and Issuance Expense - Vicker & Kendal 15,000

Cash 15,000
Kendal
Value Analysis
Total Price Paid 600,000
Total Fair Value of Net Assets
Accounts receivable 80,000
Inventory 100,000
Land 80,000
Building 400,000
Accumulated depreciation (110,000)
Current liabilities (55,000)
Bonds payable (95,000)
Others

Total Fair Value of Net Assets 400,000

Goodwill 200,000
Gain on Purchase of Business

Entry
Account Name Debit Credit
Accounts receivable 80,000
Inventory 100,000
Land 80,000
Building 400,000
Goodwill 200,000
Accumulated depreciation 110,000
Current liabilities 55,000
Bonds payable 95,000
Common stock 150,000
Paid-in capital in excess of par 450,000

Acquisition Expense - Kendal 4,000

Cash 4,000
Problem 1-4

Purchased by issuing stock

Value Analysis
Total Price Paid 500,000
Total Fair Value of Net Assets
Accounts receivable 50,000
Inventory 250,000
Land 40,000
Building 120,000
Accounts payable (40,000)
Others

Total Fair Value of Net Assets 420,000

Goodwill 80,000
Gain on Purchase of Business

Entry
Account Name Debit Credit
Accounts receivable 50,000
Inventory 250,000
Land 40,000
Building 120,000
Goodwill 80,000
Accounts payable 40,000
Common Stock 200,000
Paid-in capital in excess of par 300,000
Purchased for cash
Value Analysis
Total Price Paid 385,000
Total Fair Value of Net Assets
Accounts receivable 50,000
Inventory 250,000
Land 40,000
Building 120,000
Accounts payable (40,000)
Others

Total Fair Value of Net Assets 420,000

Goodwill
Gain on Purchase of Business (35,000)

Entry
Account Name Debit Credit
Accounts receivable 50,000
Inventory 250,000
Land 40,000
Building 120,000
Cash 385,000
Accounts payable 40,000
Gain on Acquisition of Business 35,000
Problem 1-12
Value Analysis
Total Price Paid
Stock 650,000
Total Price Paid

Total Fair Value of Net Assets

Current assets 150,000
Equipment 350,000
Deferred tax liability (45,000)
Land and buildings 250,000
Bonds payable (200,000)
Deferred tax asset
Others

Total Fair Value of Net Assets 505,000

Goodwill 145,000
Gain on Purchase of Business

Entry
Account Name Debit Credit
Current assets 150,000
Equipment 350,000
Land and buildings 250,000
Goodwill 145,000
Deferred tax liability 45,000
Bonds payable 200,000
Common Stock 100,000
Paid-in capital in excess of par 550,000

Acquisition Expense 10,000

Stock Issuance Expense 3,000
Cash 13,000
Problem 2-1 p. 104

Common Information
Ownership Interest 100%

Market
Number of Price per
Cash Shares Share
Price Paid 0 18,000 45

Acquired Company's Balance Sheet Before Purchase

Market
Book Value Value
Assets

Other current assets 70,000 70,000

Inventory 60,000 80,000
Land 40,000 90,000
Building (net) 120,000 150,000
Equipment (net) 110,000 100,000

Goodwill
Total Assets 400,000 490,000

Company
Implied Fair
Value Analysis Value Parent Price NCI Value
Price Paid 810,000 810,000 N/A
Fair Value of Net Assets Excluding Goodwill 430,000 430,000
Goodwill 380,000 380,000
Gain on Acquisition N/A N/A

Determination and Distribution of Excess Schedule

Company Parent Price

Value (100%) NCI
Fair Value of Subsidiary 810,000 810,000 N/A
Less Book Value of Interest Acquired
Common Stock 20,000
Paid in Excess 180,000
Retained Earnings 140,000
Total Equity 340,000 340,000
Interest Acquired 100%
Book Value 340,000
Excess of Cost over Book Value 470,000 470,000

Adjustment of Identifiable Accouns:

Accounts Worksheet
Adjusted Distribution
Inventory 20,000 Debit D1
Land 50,000 Debit D2
Building 30,000 Debit D3
Equipment (10,000) Credit D4
Goodwill 380,000 Debit D5
Total 470,000

Problem 2-1 Consolidated Worksheet

Balance sheet
Roland Downes Key
Other Current Assets 10,000 70,000
Inventory 120,000 60,000 D1
Land 100,000 40,000 D2
Building (net) 300,000 120,000 D3
Equipment (net) 430,000 110,000
Investment in Downes 810,000

Goodwill D5
Current Liabilities (180,000) (60,000)

Common Stock-Downes (20,000) EL

Paid in Capital-Downes (180,000) EL
Retained Earnings-Downes (140,000) EL

Common stock - Roland (58,000)

Paid in Capital in excess of par (1,152,000)
Retained earnings- Roland (380,000)
Totals 0 0
NCI
Totals

Eliminations and Adjustments

Entries Debit Credit

Investment in Downes Company 810,000

Common Stock 18,000
Paid-in capital in excess of par 792,000

Acquisition Expense 40,000

Cash 40,000
(EL)
Common Stock - Downes 20,000
Paid-in capital in excess of par - Downes 180,000
Retained Earnings - Downes 140,000
Investment in Downes Company 340,000

Inventory 20,000
Land 50,000
Building 30,000
Goodwill 380,000
Investment in Downes Company 470,000
Equipment 10,000
 Total
810,000

Book Market
Value Value
Liabilities

Current liabilities 60,000 60,000

Equity

Common stock 20,000 20,000

Paid-in capital in excess of par 180,000 180,000
Retained earnings 140,000 140,000

Total Liabilities and Equity 400,000 400,000

 Eliminations NCI Consol.
Dr Key Cr Bal. Sht.
80,000
20,000 200,000
50,000 190,000
30,000 450,000
D4 10,000 530,000
EL 340,000
D 470,000
380,000 380,000
(240,000)

20,000
180,000
140,000

(58,000)
(1,152,000)
(380,000)

820,000 820,000 0
Problem 2-2
Common Information
Ownership Interest 80%

Market
Number of Price per
Cash Shares Share
Price Paid 0 14,000 45

Acquired Company's Balance Sheet Before Purchase

Market
Book Value Value
Assets Liabilities

Other current assets 70,000 70,000 Current liabilities

Inventory 60,000 80,000
Land 40,000 90,000
Building (net) 120,000 150,000
Equipment (net) 110,000 100,000
Equity

Common stock
Paid-in capital in excess of par
Retained earnings
Goodwill
Total Assets 400,000 490,000 Total Liabilities and Equity
Company Parent Price NCI Value
Implied Fair (80%) (20%)
Value Analysis Value
Price Paid 787,500 630,000 157,500
Fair Value of Net Assets Excluding
Goodwill 430,000 344,000 86,000
Goodwill 357,500 286,000 71,500
Gain on Acquisition

Determination and Distribution of

Excess Schedule
Company Parent Price NCI Value
Value (80%) (20%)
Fair Value of Subsidiary 787,500 630,000 157,500

Less Book Value of Interest Acquired

Common Stock 20,000
Paid in Excess 180,000
Retained Earnings 140,000
Total Equity 340,000 340,000 340,000
 Interest Acquired 80% 20%
Book Value 272,000 68,000
Excess of Cost over Book Value 447,500 358,000 89,500

Adjustment of Identifiable
Accouns:
Worksheet
Accounts Adjusted Distribution

Inventory 20,000 Debit D1

Land 50,000 Debit D2
Building 30,000 Debit D3
Equipment (10,000) Credit D4
Goodwill 357,500 Debit D5
Total 447,500

Problem 2-2 Consolidated Worksheet

Balance sheet Eliminations
Roland Downes Key Dr
Other Current Assets 10,000 70,000
Inventory 120,000 60,000 D1 20,000
Land 100,000 40,000 D2 50,000
Building (net) 300,000 120,000 D3 30,000
Equipment (net) 430,000 110,000
Investment in Downes 630,000

Goodwill D5 357,500
Current Liabilities (180,000) (60,000)

Common Stock-Downes (20,000) EL 16,000

Paid in Capital -Downes (180,000) EL 144,000
Retained Earnings-Downes (140,000) EL 112,000

Common stock - Roland (54,000)

Paid in capital in excess of par (976,000)
Retained earnings- Roland (380,000)
Totals 0 0 729,500
NCI
Totals

Eliminations and Adjustments

Entries Debit Credit

Investment in Downes Company 630,000

 Common Stock 14,000
Paid-in capital in excess of par 616,000

Acquisition Expense 40,000

Cash 40,000

Common Stock - Downes 16,000

Paid-in capital in excess of par -
Downes 144,000
Retained Earnings - Downes 112,000
Investment in Downes Company 272,000

Inventory 20,000
Land 50,000
Building 30,000
Goodwill 357,500
Investment in Downes Company 358,000
Equipment 10,000
Retained Earnings - Downes 89,500
Total
630,000

Book Market
Value Value

60,000 60,000

20,000 20,000
180,000 180,000
140,000 140,000

400,000 400,000
 NCI Consol.
Key Cr Bal. Sht.
80,000
200,000
190,000
450,000
D4 10,000 530,000
EL 272,000
D 358,000
357,500
(240,000)

(4,000)
(36,000)
NCI 89,500 (117,500)

(54,000)
(976,000)
(380,000)
729,500
(157,500) (157,500)
0
Problem 2-5
Common Information
Ownership Interest 100%

Market
Number of Price per
Cash Shares Share
Price Paid 480,000

Acquired Company's Balance Sheet Before Purchase

Market
Book Value Value
Assets Liabilities

Accounts receivable 60,000 60,000 Current liabilities

Inventory 80,000 100,000 Bonds payable
Land 40,000 55,000
Buildings 300,000 200,000
Accumulated depreciation - Buildings (120,000)
Equipment 220,000 150,000 Equity
Accumulated depreciation - Equipment (60,000)
Common stock ($5)
Paid-in capital in excess of par
Retained earnings
Goodwill
Total Assets 520,000 565,000 Total Liabilities and Equity

Company
Implied Fair Parent Price
Value Analysis Value (100%) NCI Value
Price Paid 480,000 480,000 N/A
Fair Value of Net Assets Excluding
Goodwill 417,000 417,000
Goodwill 63,000 63,000
Gain on Acquisition N/A N/A

Determination and Distribution of

Excess Schedule

Company Parent Price

Value (100%) NCI
Fair Value of Subsidiary 480,000 480,000 N/A
Less Book Value of Interest Acquired
Common Stock 50,000
Paid in Excess 250,000
Retained Earnings 70,000
Total Equity 370,000 370,000
 Interest Acquired 100%
Book Value 370,000
Excess of Cost over Book Value 110,000 110,000

Adjustment of Identifiable Accouns:

Accounts Worksheet
Adjusted Distribution
Inventory 20,000 Debit D1
Land 15,000 Debit D2
Buildings (net) 20,000 Debit D3
Equipment (net) (10,000) Credit D4
Bonds payable 2,000 Debit D5
Goodwill 63,000 Debit D6
Total 110,000

Prepare the entries below: Debit Credit

Investment in Robby Corp. 480,000

Cash 480,000

Inventory 20,000
Land 15,000
Buildings (net) 20,000
Bonds payable 2,000
Goodwill 63,000
Equipment (net) 10,000
Paid-in capital in excess of par 110,000
Total
480,000

Book Market
Value Value

50,000 50,000
100,000 98,000

50,000
250,000
70,000

520,000 148,000
Problem 2-6
Common Information
Ownership Interest 100%

Market
Number of Price per
Cash Shares Share
Price Paid 450,000

Acquired Company's Balance Sheet Before Purchase

Book Market
Value Value
Assets Liabilities

Cash 40,000 40,000 Current Liabilities

Accounts receivable 30,000 30,000 Bonds payable
Inventory 120,000 140,000
Land 35,000 45,000
Buildings and equipment 230,000 225,000
Accumulated depreciation (50,000) Equity
Copyrights 10,000 25,000 Common Stock ($5 par)
Paid-in capital in excess of par
Retained earnings

Goodwill
Total Assets 415,000 505,000 Total Liabilities and Equity

Company
Implied Parent Price
Value Analysis Fair Value (100%) NCI Value
Price Paid 450,000 450,000 N/A
Fair Value of Net Assets Excluding
Goodwill 335,000 335,000
Goodwill 115,000 115,000
Gain on Acquisition

Determination and Distribution

of Excess Schedule

Company Parent Price

Value (100%) NCI
Fair Value of Subsidiary 450,000 450,000
Less Book Value of Interest
Acquired
Common Stock 50,000
Paid in Excess 70,000
Retained Earnings 130,000
 Total Equity 250,000 250,000
Interest Acquired 100%
Book Value 250,000
Excess of Cost over Book Value 200,000 200,000

Adjustment of Identifiable
Accouns:
Accounts Worksheet
Adjusted Distribution
Inventory 20,000 Debit D1
Land 10,000 Debit D2
Buildings and equipment (net) 45,000 Debit D3
Copyrights 15,000 Debit D4
Bonds payable (5,000) Credit D5
Goodwill 115,000 Debit D6
Total 200,000

Problem 2-6 Consolidated Worksheet

Balance sheet Eliminations
Aron Shield Key Dr
Cash 185,000 40,000
Accounts receivable 70,000 30,000
Inventory 130,000 120,000 D1 20,000
Investment in Subsidiary 450,000

Land 50,000 35,000 D2 10,000

Building and equipment 350,000 230,000 D3 45,000
Accumulated depreciation (100,000) (50,000)
Copyright 40,000 10,000 D4 15,000

Goodwill D6 115,000
Current liabilities (192,000) (65,000)
Bonds payable (100,000)

Common stock - Shield (50,000) EL 50,000

Paid-in excess - Shield (70,000) EL 70,000
Retained earnings - Shield (130,000) EL 130,000

Common stock - Aron (100,000)

Paid-in excess - Aron (250,000)
Retained earnings- Aron (633,000)
Totals 0 0 455,000
NCI
Totals

Eliminations and Adjustments

Debit Credit
Investment in Shield Company 450,000
Cash 450,000

Common Stock - Shield 50,000

Paid-in capital in excess of par -
Shield 70,000
Retained Earnings - Shield 130,000
Investment in Shield Company 250,000

Inventory 20,000
Land 10,000
Buildings and equipment (net) 45,000
Copyrights 15,000
Goodwill 115,000
Bonds payable 5,000
Investment in Shield Company 200,000
Total
450,000

Book Market
Value Value

65,000 65,000
100,000 105,000

50,000
70,000
130,000

415,000 170,000
 NCI Consol.
Key Cr Bal. Sht.
225,000
100,000
270,000
EL 250,000
D 200,000
95,000
625,000
(150,000)
65,000

115,000
(257,000)
D5 5,000 (105,000)

(100,000)
(250,000)
(633,000)
455,000