Intercompany Notes, 90% Acquisition
On January 1, 2009, Pope Company purchased 90% of Sun Company”s common stock for $5,800,000 cash. Immediately after the acquisition, the two companies” balance sheets were as follows:
|
Pope |
Sun |
|
|
Cash |
$ 297,000 |
$ 165,000 |
|
Accounts receivable |
432,000 |
468,000 |
|
Notes receivable |
90,000 |
|
|
Inventory |
1,980,000 |
1,447,000 |
|
Investment in Sun Company |
5,800,000 |
|
|
Plant and equipment (net) |
5,730,000 |
3,740,000 |
|
Land |
1,575,000 |
908,000 |
|
Total |
$15,904,000 |
$6,728,000 |
|
Accounts payable |
$ 698,000 |
$ 247,000 |
|
Notes payable |
2,250,000 |
110,000 |
|
Common stock ($15 par) |
4,500,000 |
5,250,000 |
|
Other contributed capital |
5,198,000 |
396,000 |
|
Treasury stock held |
(1,200,000) |
|
|
Retained earnings |
3,258,000 |
1,925,000 |
|
Total |
$15,904,000 |
$6,728,000 |
Sun Company”s note payable includes a $90,000 note payable to Pope Company, plus $20,000 payable to a bank. Any difference between book value and the value implied by the purchase price relates to subsidiary property and equipment.
Required:
- Prepare a Computation and Allocation Schedule for the difference between book value of equity and the value implied by the purchase price.
- Prepare a consolidated balance sheet workpaper on January 1, 2009.