Question

On January 1, Park Corporation and Strand Corporation had condensed balance sheets as follows:    Park...

On January 1, Park Corporation and Strand Corporation had condensed balance sheets as follows:
   Park Strand
  Current assets $ 94,750      $ 28,100   
  Noncurrent assets 99,500      41,900   
  
      Total assets $ 194,250     $ 70,000   
  
  Current liabilities $ 39,000      $ 20,000   
  Long-term debt 51,250      —   
  Stockholders' equity 104,000      50,000   
  
      Total liabilities and equities $ 194,250     $ 70,000   
  

  

On January 2, Park borrowed $64,000 and used the proceeds to obtain 80 percent of the outstanding common shares of Strand. The acquisition price was considered proportionate to Strand’s total fair value. The $64,000 debt is payable in 10 equal annual principal payments, plus interest, beginning December 31. The excess fair value of the investment over the underlying book value of the acquired net assets is allocated to inventory (60 percent) and to goodwill (40 percent).


On a consolidated balance sheet as of January 2, what should be the amount for noncurrent liabilities?

Homework Answers

Answer #1

Solution:

Particulars Amount
Non current asset of park $99,500
Non currnet asset of strand $41,900
Excess fair value of goodwill $12,000
Total non current assets $153,400

Working:

Particulars Amount
Fair value on acquisition date (64,000/80%) $80,000
Less: Book value of strand ($28,100+$41,900-$20,000) $50,000
Fair value in excess of book value $30,000
Excess assigned to inventory(60%) $18,000
Excess assigned to goodwill (40%) $12,000

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