Complete Problem
Using the data given in Problem 2-6, assume that Aron Company purchases 80% of the common stock of Shield Company for $320,000 cash.
The following comparative balance sheets are prepared for the two companies immediately after the purchase:
|
Aron
|
Shield
|
|
Cash
|
$ 315,000
|
$ 40,000
|
|
Accounts receivable
|
70,000
|
30,000
|
|
Inventory
|
130,000
|
120,000
|
|
Investment in Shield Company
|
320,000
|
|
|
Land
|
50,000
|
35,000
|
|
Buildings and equipment
|
350,000
|
230,000
|
|
Accumulated depreciation
|
(100,000)
|
(50,000)
|
|
Copyrights
|
40,000
|
10,000
|
|
Total assets
|
$1,175,000
|
$415,000
|
|
Current liabilities
|
$ 192,000
|
$ 65,000
|
|
Bonds payable
|
|
100,000
|
|
Common stock ($10 par)-Aron
|
100,000
|
|
|
Common stock ($5 par)-Shield
|
|
50,000
|
|
Paid-in capital in excess of par
|
250,000
|
70,000
|
|
Retained earnings
|
633,000
|
130,000
|
|
Total liabilities and equity
|
$1,175,000
|
$415,000
|
Required
1. Prepare the value analysis and the determination and distribution of excess schedule for the investment in Shield Company.
2. Complete a consolidated worksheet for Aron Company and its subsidiary Shield Company as of December 31, 2015.
Information from 2-6
On December 31, 2015, Aron Company purchases 100% of the common stock of Shield Company for $450,000 cash. On this date, any excess of cost over book value is attributed to accounts with fair values that differ from book values. These accounts of Shield Company have the following fair values:
|
Cash
|
$ 40,000
|
|
Accounts receivable
|
30,000
|
|
Inventory
|
140,000
|
|
Land
|
45,000
|
|
Buildings and equipment
|
225,000
|
|
Copyrights
|
25,000
|
|
Current liabilities
|
65,000
|
|
Bonds payable
|
105,000
|
The following comparative balance sheets are prepared for the two companies immediately after the purchase:
|
Aron
|
Shield
|
|
Cash
|
$ 185,000
|
$ 40,000
|
|
Accounts receivable
|
70,000
|
30,000
|
|
Inventory
|
130,000
|
120,000
|
|
Investment in Shield Company
|
450,000
|
|
|
Land
|
50,000
|
35,000
|
|
Buildings and equipment
|
350,000
|
230,000
|
|
Accumulated depreciation
|
(100,000)
|
(50,000)
|
|
Copyrights
|
40,000
|
10,000
|
|
Total assets
|
$1,175,000
|
$415,000
|
|
Current liabilities
|
$ 192,000
|
$ 65,000
|
|
Bonds payable
|
|
100,000
|
|
Common stock ($10 par)-Aron
|
100,000
|
|
|
Common stock ($5 par)-Shield
|
|
50,000
|
|
Paid-in capital in excess of par
|
250,000
|
70,000
|
|
Retained earnings
|
633,000
|
130,000
|
|
Total liabilities and equity
|
$1,175,000
|
$415,000
|