Bon Air, Inc., purchased 70 percent (2,800 shares) of the outstanding voting stock of Creedmoor Corporation on January 1, 2007, for $250,000 cash. Creedmoor’s net assets on that date totaled $230,000, but this balance included three accounts having fair values that differed from their book values:
|
Book Value |
Fair Value |
|
|
Land |
$ 30,000 |
$ 40,000 |
|
Equipment (14 year life) |
50,000 |
118,000 |
|
Liabilities (10 year life) |
(70,000) |
(50,000) |
As of December 31, 2010, the two companies report the following balances:
|
Bon Air |
Creedmoor |
|
|
Revenues |
$ (694,800) |
$(250,000) |
|
Operating expenses |
630,000 |
180,000 |
|
Investment income |
(44,200) |
–0– |
|
Net income |
$ (109,000) |
$ (70,000) |
|
Retained earnings, 1/1/10 |
$ (760,000) |
$(260,000) |
|
Net income |
(109,000) |
(70,000) |
|
Dividends paid |
68,000 |
10,000 |
|
Retained earnings, 12/31/10 |
$ (801,000) |
$(320,000) |
|
Current assets |
$ 72,000 |
$ 120,000 |
|
Investment in Creedmoor Corp |
321,800 |
–0– |
|
Land |
241,000 |
50,000 |
|
Buildings (net) |
289,000 |
200,000 |
|
Equipment (net) |
165,200 |
40,000 |
|
Total assets |
$ 1,089,000 |
$ 410,000 |
|
Liabilities |
$ (180,000) |
$ (50,000) |
|
Common stock |
(50,000) |
(40,000) |
|
Additional paid in capital |
(58,000) |
–0– |
|
Retained earnings, 12/31/10 |
(801,000) |
(320,000) |
|
Total liabilities and equities |
$(1,089,000) |
$(410,000) |
Prepare a worksheet to consolidate these two companies as of December 31, 2010. Because Bon Air acquired Creedmoor before the effective date of the acquisition method (2009), the purchase method is appropriate.