Exercise 7 (LO 5, 6, 7, 8) 80% purchase with a gain and preexisting goodwill. Ve- nus Company…

Exercise 7 (LO 5, 6, 7, 8) 80% purchase with a gain and preexisting goodwill. Ve- nus Company purchases 8,000 shares of Sundown Company for $64 per share. Just prior to the purchase, Sundown Company has the following balance sheet:

Assets Liabilities and Equity

Cash . . . . . . . . . . . . . . . . . . . . . . . . .

$ 20,000

Current liabilities . . . . . . . . . . . . . . . .

$250,000

Inventory . . . . . . . . . . . . . . . . . . . . . .

280,000

Common stock ($5 par). . . . . . . . . . .

50,000

Property, plant, and equipment (net) .

400,000

Paid-in capital in excess of par . . . . .

130,000

Goodwill . . . . . . . . . . . . . . . . . . . . . .

100,000

Retained earnings . . . . . . . . . . . . . . .

370,000

Total assets. . . . . . . . . . . . . . . . . . . $800,000 Total liabilities and equity . . . . . . . $800,000

Venus Company believes that the inventory has a fair value of $400,000 and that the prop- erty, plant, and equipment is worth $500,000.

1. Prepare the value analysis schedule and the determination and distribution of excess sched- ule.

2. Prepare the elimination entries that would be made on a consolidated worksheet prepared on the date of acquisition.

 

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