Advanced Accounting 12th Edition Beams Test Bank

Page 16

Full file at https://testbankuniv.eu/Advanced-Accounting-12th-Edition-Beams-Test-Bank

7) On January 1, 2013, Pendal Corporation purchased 25% of the outstanding common stock of Sedda Corporation for $100,000 cash. Book value and fair value of Sedda's assets and liabilities at the time of acquisition are shown below. Assets Cash Accounts receivable Inventories Equipment

Liabilities & Equities Accounts payable Note payable Capital stock Retained earnings

Book Values $40,000 100,000 40,000 180,000 $360,000

Fair Values $40,000 90,000 50,000 210,000 $390,000

$110,000 50,000 100,000 100,000 $360,000

$110,000 40,000

$150,000

Required: Prepare an allocation schedule for Pendal's investment in Sedda. Answer: Investment cost $100,000 Less: Book value acquired: $200,000 Ă— 25% = (50,000) Excess cost over book value acquired = $ 50,000 Schedule to Allocate Cost-Book Value Differentials

Accounts receivable Inventories Equipment Notes payable Allocated to specific assets Remainder allocated to goodwill Excess of cost over book value acquired

Fair valueBook value (10,000) 10,000 30,000 10,000

Interest 25% 25% 25% 25%

Objective: LO5 Difficulty: Moderate

16 Copyright Š 2015 Pearson Education, Inc.

Full file at https://testbankuniv.eu/Advanced-Accounting-12th-Edition-Beams-Test-Bank

Amount Assigned $(2,500) 2,500 7,500 2,500 $10,000 40,000 $50,000


Issuu converts static files into: digital portfolios, online yearbooks, online catalogs, digital photo albums and more. Sign up and create your flipbook.