purnell corporation acquired soma corporation on december 31 20×1 purnell exchanged 738572
Purnell Corporation acquired Soma Corporation on December 31, 20X1. Purnell exchanged
shares of its $1 par, $50 fair value stock for the common stock of Soma. Soma had the fol lowing balance sheet on the date of acquisition:
Soma Corporation Balance Sheet December 31, 20X1
Assets Liabilities and Equity
Accounts receivable . . . . . . . $ 50,000 Current liabilities . . . . . . . . . $ 90,000
Inventory . . . . . . . . . . . . . . 120,000 Bonds payable . . . . . . . . . . 200,000
Land . . . . . . . . . . . . . . . . . 100,000 Common stock . . . . . . . . . . 10,000
Buildings . . . . . . . . . . . . . . 300,000 Paid in capital in excess
Accumulated depreciation . . . (100,000) of par . . . . . . . . . . . . . . 190,000
Equipment . . . . . . . . . . . . . 140,000 Retained earnings . . . . . . . . 140,000
Accumulated depreciation . . . (50,000) Patent . . . . . . . . . . . . . . . . 10,000
Goodwill . . . . . . . . . . . . . . 60,000
Total assets . . . . . . . . . . . $ 630,000 Total liabilities and equity . . $630,000
An appraisal has been performed to determine whether the book values of Soma’s net assets reflect their fair values. The appraiser also determined that several intangible assets ex isted, although they were not recorded. The following assets and liabilities had fair values that differed from their book values:
|
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . |
$150,000 |
|
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
200,000 |
|
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . |
400,000 |
|
Equipment . . . . . . . . . . . . . . . . . . . . . . . . . |
200,000 |
|
Patent . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
150,000 |
|
Computer software . . . . . . . . . . . . . . . . . . . . |
50,000 |
|
Bonds payable . . . . . . . . . . . . . . . . . . . . . . |
210,000 |
80% purchase, bargain, several adjustments, work sheet. Use the preceding information for Purnell’s purchase of Soma common stock. Assume Purnell exchanged 10,000 shares of its own stock for 80% of the common stock of Soma. The stock had a market value of $50 per share and a par value of $1. Purnell had the following trial balance immediately after the purchase:
Purnell Company Trial Balance December 31, 20X1
Required
|
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
170,000 |
|
Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
300,000 |
|
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
410,000 |
|
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
800,000 |
|
Investment in Soma . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
500,000 |
|
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
2,800,000 |
|
Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
(500,000) |
|
Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
600,000 |
|
Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
(230,000) |
|
Current Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
(150,000) |
|
Bonds Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
(300,000) |
|
Common Stock ($1 par) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
(86,000) |
|
Paid In Capital in Excess of Par . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
(3,214,000) |
|
Retained Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
(1,100,000) |
|
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
0 |
1. Prepare a zone analysis and a determination and distribution of excess schedule for the in vestment in Soma.
2. Complete a consolidated worksheet for Purnell Company and its subsidiary Soma Company as of December 31, 20X1.