Exam 5: Allocation and Depreciation of Differences Between Implied and Book Value

Use the following information to answer questions On January 1, 2013, Poole Company purchased 75% of the common stock of Swimmer Company.Separate balance sheet data for the companies at the combination date are given below: Determine below what the consolidated balance would be for each of the requested accounts on January 2, 2013. -What is the amount of total assets?

Pulman Company acquired 90% of the stock of Spectrum Company for $6,300,000 on January 1, 2013.On this date, the fair value of the assets and liabilities of Spectrum Company was equal to their book value except for the inventory and equipment accounts.The inventory had a fair value of $2,300,000 and a book value of $1,900,000.The equipment had a fair value of $3,300,000 and a book value of $2,800,000. The balances in Spectrum Company's capital stock and retained earnings accounts on the date of acquisition were $3,700,000 and $1,900,000, respectively. Required: In general journal form, prepare the entries on Spectrum Company's books to record the effect of the pushed down values implied by the acquisition of its stock by Pulman Company assuming that: A values are allocated on the basis of the fair value of Spectrum Company as a whole imputed from the transaction. B values are allocated on the basis of the proportional interest acquired by Pulman Company.

Use the following information to answer questions On January 1, 2013, Pamela Company purchased 75% of the common stock of Snicker Company.Separate balance sheet data for the companies at the combination date are given below: Determine below what the consolidated balance would be for each of the requested accounts on January 2, 2013. -What amount of goodwill will be reported?

In what account is the difference between book value and the value implied by the purchase price recorded on the books of the investor? In what account is the "excess of implied over fair value" recorded?

In a business combination accounted for as an acquisition, how should the excess of fair value of identifiable net assets acquired over implied value be treated?

When the implied value exceeds the aggregate fair values of identifiable net assets, the residual difference is accounted for as

Under which set of circumstances would it not be appropriate to assume the value the noncontrolling shares is the same as the controlling shares?

The parent company's share of the fair value of the net assets of a subsidiary may exceed acquisition cost.How must this excess be treated in the preparation of consolidated financial statements?

Use the following information to answer questions On January 1, 2013, Pamela Company purchased 75% of the common stock of Snicker Company.Separate balance sheet data for the companies at the combination date are given below: Determine below what the consolidated balance would be for each of the requested accounts on January 2, 2013. -What is the amount of total assets?

Goodwill represents the excess of the implied value of an acquired company over the

Use the following information to answer questions On January 1, 2013, Pamela Company purchased 75% of the common stock of Snicker Company.Separate balance sheet data for the companies at the combination date are given below: Determine below what the consolidated balance would be for each of the requested accounts on January 2, 2013. -What is the amount of consolidated retained earnings?

On January 1, 2013, Preston Corporation acquired an 80% interest in Spiegel Company for $2,400,000.At that time Spiegel Company had common stock of $1,800,000 and retained earnings of $800,000.The book values of Spiegel Company's assets and liabilities were equal to their fair values except for land and bonds payable.The land's fair value was $120,000 and its book value was $100,000.The outstanding bonds were issued on January 1, 2005, at 9% and mature on January 1, 2015.The bond principal is $600,000 and the current yield rate on similar bonds is 8%. Required: Prepare the workpaper entries necessary on December 31, 2013, to allocate, amortize, and depreciate the difference between implied and book value.

On January 1, 2013, Lester Company purchased 70% of Stork Corporation's $5 par common stock for $600,000.The book value of Stork net assets was $640,000 at that time.The fair value of Stork's identifiable net assets were the same as their book value except for equipment that was $40,000 in excess of the book value.In the January 1, 2013, consolidated balance sheet, goodwill would be reported at

Use the following information to answer questions On January 1, 2013, Poole Company purchased 75% of the common stock of Swimmer Company.Separate balance sheet data for the companies at the combination date are given below: Determine below what the consolidated balance would be for each of the requested accounts on January 2, 2013. -What amount of inventory will be reported?

Dividends declared by a subsidiary are eliminated against dividend income recorded by the parent under the