Bargain purchase, allocation. Lancaster Company is purchasing 100% of the outstanding common stock of Villard Company for $600,000 plus $20,000 of direct acquisition costs. The following balance sheet was prepared for Villard on the date of the purchase:
|
Assets |
Liabilities and Equity |
||
|
Inventory |
$50,000 |
Current liabilities |
$150,000 |
|
Mineral rights |
250,000 |
Common stock ($5 par) |
100,000 |
|
Equipment (net) |
150,000 |
Paid in capital in excess of par |
300,000 |
|
Goodwill |
50,000 |
Retained earnings |
50,000 |
|
Total assets |
$500,000 |
Total liabilities and equity |
$500,000 |
Appraisals are as follows for the assets of Villard Company:
|
Inventory |
$10,000 |
|
Mineral rights |
700,000 |
|
Equipment |
100,000 |
Based on the preceding facts,
1. Prepare a zone analysis and a determination and distribution of excess schedule.
2. Prepare the elimination entries that would be made on a consolidated worksheet prepared on the date of purchase.