Question

Packer Company acquired 75% of the shares of Skye Company for $50,000 in cash. The fair...

Packer Company acquired 75% of the shares of Skye Company for $50,000 in cash. The fair value of the noncontrolling interest is $15,000. At the date of acquisition, the fair values of Skye’s reported net assets equal their book values, but Skye has previously unreported in-process R&D valued at $1,000. The trial balances of Packer and Skye just prior to acquisition appear below.

Packer

Skye

Dr (Cr)

Current assets

$ 65,000

$ 10,000

Plant & equipment, net

450,000

186,000

Liabilities

(395,000)

(130,000)

Capital stock

(40,000)

(85,000)

Retained earnings

(75,000)

15,000

Accumulated other comprehensive loss (income)

    (5,000)

    4,000

Total

$           0

$           0

Required

a.         Calculate the gain on acquisition and prepare the journal entry Packer makes to record the acquisition.

b.         Prepare a working paper to consolidate Packer and Skye at the date of acquisition.

c.          Present the consolidated balance sheet at the date of acquisition.

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Part A

Fair value of identifiable net assets (10000+186000-130000)

$66000

Acquisition cost

(50000)

Fair value of noncontrolling interest

(15000)

Gain on acquisition

$1000

Packer’s acquisition entry:

Account titles and explanation

Debit

Credit

Investment in Skye

51000

Cash

50000

Gain on acquisition

1000

Part B

Packer Dr (Cr)

Skye Dr (Cr)

Dr.

Cr.

Consol. Dr (Cr)

Current assets

15000

10000

25000

Plant & equipment, net

450000

186000

636000

Investment in Skye

51000

51000 (E)

0

Liabilities

(395000)

(130000)

(525000)

Capital stock

(40000)

(85000)

85000 (E)

(40000)

Retained earnings

(76000)

15000

15000 (E)

(76000)

AOCI

(5000)

4000

4000 (E)

(5000)

Noncontrolling interest in equity

15000 (E)

(15000)

Total

0

0

$85000

$85000

0

Retained earnings = 75000+1000 = 76000

Part C

PACKER COMPANY and SKYE COMPANY

Consolidated Balance Sheet

Date of Acquisition

Assets

Liabilities & Equity

Current assets

25000

Liabilities

525000

Plant & equipment, net

636000

Capital stock

40000

Retained earnings

76000

Accumulated other comprehensive income

5000

Equity to controlling interest

121000

Noncontrolling interest in equity

15000

Total equity

136000

Total Assets

$661000

Total liabilities & equity

$661000
0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Sam Company purchased all of the shares of Johns Company for $5,000,000 in cash on January...
Sam Company purchased all of the shares of Johns Company for $5,000,000 in cash on January 1, 2015. At the date of acquisition, fair values of John's current assets totaled $350,000, fair values of Johns long-term assets totaled $2,800,000, and fair values of Johns liabilities were the same as reported values. John's has no previously unreported assets or liabilities. The balance sheets of Sam and John’s just after the acquisition appear below. Sam Co......... John's Co.            ...
Goodwill, Equity Method, Eliminating Entries, First Year On January 1, 2020, Playtel Inc. acquired 75 percent...
Goodwill, Equity Method, Eliminating Entries, First Year On January 1, 2020, Playtel Inc. acquired 75 percent of the stock of San Jose Cable for $200 million in cash. At the date of acquisition, the fair value of the noncontrolling interest was $50 million, and Playtel’s shareholders’ equity accounts were as follows (in thousands): Common stock, $1 par $5,000 Additional paid-in capital 25,000 Retained deficit (1,000) Treasury stock (800) Total $28,200 Both companies have a December 31 year-end. At the date...
You are responsible for preparing the consolidated balance sheet of Princecraft and its new subsidiary, Sylvan,...
You are responsible for preparing the consolidated balance sheet of Princecraft and its new subsidiary, Sylvan, at the date of acquisition. The consolidation working paper as of the date of acquisition appears below. Sylvan’s assets and liabilities are reported at fair value, except that its plant and equipment is overvalued by $15,000,000, and it has previously unreported developed technology, which meets the requirements for capitalization per ASC Topic 805, valued at $20,000,000. Required a.         Fill in the consolidation working paper....
On January 1, 2021, Ackerman Company acquires 80% of Seidel Company for $1,866,080 in cash consideration....
On January 1, 2021, Ackerman Company acquires 80% of Seidel Company for $1,866,080 in cash consideration. The remaining 20 percent noncontrolling interest shares had an acquisition-date estimated fair value of $466,520. Seidel’s acquisition-date total book value was $1,853,000. The fair value of Seidel’s recorded assets and liabilities equaled their carrying amounts. However, Seidel had two unrecorded assets—a trademark with an indefinite life and estimated fair value of $267,050 and several customer relationships estimated to be worth $196,200 with four-year remaining...
On December 31, 20X9, Add-On Company acquired 100 percent of Venus Corporation's common stock for $300,000....
On December 31, 20X9, Add-On Company acquired 100 percent of Venus Corporation's common stock for $300,000. Balance sheet information Venus just prior to the acquisition is given here: Cash and Receivables $35,000 Inventory 75,000 Land 100,000 Buildings and Equipment (net) 220,000 Total Assets $430,000 Accounts Payable $65,000 Bonds Payable 150,000 Common Stock 100,000 Retained Earnings 115,000 Total Liabilities and Stockholders’ Equity $430,000 At the date of the business combination, Venus's net assets and liabilities approximated fair value except for inventory,...
On January 1, 2021, Ackerman Company acquires 80% of Seidel Company for $1,797,600 in cash consideration....
On January 1, 2021, Ackerman Company acquires 80% of Seidel Company for $1,797,600 in cash consideration. The remaining 20 percent noncontrolling interest shares had an acquisition-date estimated fair value of $449,400. Seidel’s acquisition-date total book value was $1,785,000. The fair value of Seidel’s recorded assets and liabilities equaled their carrying amounts. However, Seidel had two unrecorded assets—a trademark with an indefinite life and estimated fair value of $257,250 and several customer relationships estimated to be worth $189,000 with four-year remaining...
On January 1, 2021, Ackerman Company acquires 80% of Seidel Company for $1,746,240 in cash consideration....
On January 1, 2021, Ackerman Company acquires 80% of Seidel Company for $1,746,240 in cash consideration. The remaining 20 percent noncontrolling interest shares had an acquisition-date estimated fair value of $436,560. Seidel’s acquisition-date total book value was $1,734,000. The fair value of Seidel’s recorded assets and liabilities equaled their carrying amounts. However, Seidel had two unrecorded assets—a trademark with an indefinite life and estimated fair value of $249,900 and several customer relationships estimated to be worth $183,600 with four-year remaining...
Montgomery Company purchases 85% of Better Gravy Boat Corporation on December 31, 20X6, for $10 million...
Montgomery Company purchases 85% of Better Gravy Boat Corporation on December 31, 20X6, for $10 million and is preparing consolidated financial statements as of that date. Under the acquisition method of accounting, which of the following statements is correct with respect to Montgomery's consolidated financial statements? A. The noncontrolling interest in Better Gravy Boat's net assets is normally presented between the liabilities section and stockholders' equity section of Montgomery's balance sheet under all circumstances. B. The noncontrolling interest in Better...
Montgomery Company purchases 85% of Better Gravy Boat Corporation on December 31, 20X6, for $10 million...
Montgomery Company purchases 85% of Better Gravy Boat Corporation on December 31, 20X6, for $10 million and is preparing consolidated financial statements as of that date. Under the acquisition method of accounting, which of the following statements is correct with respect to Montgomery's consolidated financial statements? A. The noncontrolling interest in Better Gravy Boat's net assets is normally presented between the liabilities section and stockholders' equity section of Montgomery's balance sheet under all circumstances. B. The noncontrolling interest in Better...
1. Dodd Co. acquired 75% of the common stock of Wallace Corp. for $1,800,000. The fair...
1. Dodd Co. acquired 75% of the common stock of Wallace Corp. for $1,800,000. The fair value of Wallace’s net assets was $2,100,000, and the book value was $1,900,000. The noncontrolling interest shares of Wallace Corp. are not actively traded. What is the total amount of goodwill recognized at the date of acquisition? a. $0 b. $300,000 c. $200,000 d. $700,000 e. $100,000 2. When Valley Co. acquired 80% of the common stock of Coleman Corp., Coleman owned land with...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT