In: Accounting
On December 31, 2015, Aron Company purchases 80% of the common stock of Shield Company for $320,000 cash. On this date, any excess of cost over book value is attributed to accounts with fair values that differ from book values. These accounts of Shield Company have the following fair values:
Cash - $40,000
A/R - 30,000
Inventory - 140,000
Land - 45,000
Buildings & equipment - 225,000
Copyrights - 25,000
Current liabilities - 65,000
Bonds payable - 105,000
The following comparative balance sheets are prepared for the two companies immediately after the purchase:
Aron Shield
cash $315,000 40,000
a/r 70,000 30,000
Inventory 130,000 120,000
Investment in Shield 320,000
Land 50,000 35,000
Buildings and equipment 350,000 230,000
Acc.Depr. (100,000) (50,000)
Copyrights 40,000 10,000
total assets 1,175,000 415,000
Current liabilities $192,000 65,000
Bonds payable 100,000
Common stock ($10 par) Aron 100,000
Common stock ($5 par) Shield 50,000
Paid in capital in excess of par 250,000 70,000
Retained Earnings 633,000 130,000
Total liabilites and equity 1,175,000 415,000
Prepare the Value Analysis Schedule and the Determination and Distribution of Excess Schedule for the investment in Shield Company.
Prepare the elimination entries that would be made on a consolidated worksheet prepared on the date of acquisition.