Question

On July 1, 2014, Piper Corporation issued 23,000 shares of its own $2 par value common stock for 40,000 shares of the outstanding stock of Sector Inc. in an acquisition. Piper common stock at July 1, 2014 was selling at $16 per share. Just before the business combination, balance sheet information of the two corporations was as follows:

Piper               Sector               Sector

                                                    Book Book                 Fair

                                                   Value Value               Value

Cash                                          $25,000              $17,000             $17,000

Inventories 55,000 42,000               47,000

Other current assets                   110,000               40,000               30,000

Land 100,000               45,000               35,000

Plant and equipment-net            660,000              220,000             280,000

$950,000            $364,000            $409,000

Liabilities $220,000              $70,000             $75,000

Capital stock, $2 par value 500,000              100,000

Additional paid-in capital 170,000               90,000

Retained earnings 60,000              104,000

  $950,000            $364,000

Required:

Prepare a consolidated balance sheet for Piper Corporation and Subsidiary immediately after the business combination and write down below the accounts' balances as they show up in the consolidated balance sheet.

Assets:

Cash.......................................Answer

Inventories..............................Answer

Other Current Assets..............Answer

Land........................................Answer

Plant and Equipment..............Answer

Goodwill..................................Answer

Investment in Sector...............Answer

Unamortized Excess...............Answer

Total Assets.............................Answer

Liabilities..................................Answer

Capital Stock..........................Answer

Additional Paid-in Capital.......Answer

Retained Earnings..................Answer

Non-controlling Interest.........Answer

Total Equities..........................Answer

Answer 1

	Piper	Sector	Eliminations		Consolidated Balance Sheet
			Debit	Credit
Assets:
Cash	25000	17000			42000
Inventories	55000	42000	5000		102000
Other current assets	110000	40000		10000	140000
land	100000	45000		10000	135000
Plant and equipment - net	660000	220000	60000		940000
goodwill			126000		126000
Investment in sector	368000			368000	0
Unamortized excess			166000	166000	0
Total assets	1318000	364000			1485000
Equities:
liabilities	220000	70000		5000	295000
Capital stock	546000	100000	100000		546000
Additional paid in capital	492000	90000	90000		492000
Retained earnings	60000	104000	104000		60000
Noncontrolling interest				92000	92000
Total equities	1318000	364000			1485000
			651000	651000

Explanation:

Sector stock outstanding………………………………………………….. $100,000

$100,000 / $2 par value = 50,000 shares o/s

40,000 purchased / 50,000 …………………………………………………… 80%

Fair value (purchase price) of 80% interest acquired……………………… $368,000

Implied fair value of Sector ($368,000 / 80%) ………………………………….460,000

Book value of Sector's net assets ……………………………………………………(294,000)

Excess fair value over book value acquired ……………………………………… $166,000

Allocation of excess of fair value over book value:

Inventory………………………………………………………. $5,000

Other current assets………………………………………. (10,000)

Land (10,000) Plant and Equipment…………......…… .. 60,000

Liabilities…………………………………………………… (5,000)

Remainder to goodwill …………………………………..126,000

Excess of fair value over book value………………. $166,000