Procedures for 100% account adjustment including goodwill. Baker Inc. purchased 80% of the outstanding stock of Flour Inc. for $830,000. Baker also paid $10,000 in direct acquisition costs and $3,000 for indirect acquisition costs. Just before the investment, the two companies had the following balance sheets:
|
Assets |
||
|
Baker Inc |
Flour Inc |
|
|
Accounts receivable |
$ 900,000 |
$ 500,000 |
|
Inventory |
600,000 |
200,000 |
|
Property, plant, and equipment (net) |
1,500,000 |
600,000 |
|
Total assets |
$3,000,000 |
$1,300,000 |
|
Liabilities and Equity |
|
|
|
Current liabilities |
$ 950,000 |
$ 400,000 |
|
Bonds payable |
500,000 |
200,000 |
|
Common stock ($10 par) |
400,000 |
300,000 |
|
Paid-in capital in excess of par |
400,000 |
380,000 |
|
Retained earnings |
750,000 |
20,000 |
|
Total liabilities and equity |
$3,000,000 |
$1,300,000 |
Appraisals for the assets of Flour Inc. indicate that fair values differ from recorded book values for the inventory and for the property, plant, and equipment which have fair values of $250,000 and $700,000, respectively.
Part A.
Using the Economic Unit Concept—Full Goodwill, complete the following:
1. Prepare the entry to record the purchase of the Flour Inc. common stock, including all acquisition costs.
2. Prepare a determination and distribution of excess schedule for the investment in Flour Inc.
The D&D need not include amortization amounts.
3. Prepare the elimination entries that would be made on a consolidated worksheet on the date of acquisition.
Part B.
Using the Economic Unit Concept—Goodwill Only on the Controlling Interest, complete the following:
1. Prepare the entry to record the purchase of the Flour Inc. common stock, including all acquisition costs.
2. Prepare a determination and distribution of excess schedule for the investment in Flour Inc.
The D&D need not include amortization amounts.
3. Prepare the elimination entries that would be made on a consolidated worksheet on the date of acquisition.