December 31, 20X1, 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:
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a.
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Prepare a value analysis schedule for this business combination.
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b.
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Prepare the determination and distribution schedule for this business combination
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c.
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Prepare the necessary elimination entries in general journal form.
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a) Value analysis schedule
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Company
Implied
Fair Value
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Parent Price
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NCI Value
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Company fair value
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Fair value identifiable net assets
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Goodwill
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b) Determination and distribution schedule:
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Company
Implied
Fair Value
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Parent Price
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NCI Value
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Fair value of subsidiary
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Less book value:
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C Stk
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APIC
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R/E
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Total S/E
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Interest Acquired
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Book value
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Excess of fair over book
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Adjust identifiable accounts:
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Inventory
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Land
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Bldgs & Equip
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Bond Pay Discount
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Goodwill
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Total
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c) Elimination entries:
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ELIMINATION ENTRY 'EL'
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C Stk-Sub
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APIC-Sub
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R/E-Sub
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Investment in Sub
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200,000
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200,000
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ELIMINATION ENTRY 'D'
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Inventory
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Land
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Bldgs & Equip
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Bond Pay Discount
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Goodwill
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Investment in Sub
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R/E-Sub (NCI)
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100,000
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100,000
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