Problem:
Tribbs has decided to purchase Ruth and Bob's 80% ownership of Quicker Distribution Company for $90,000 in excess of book value and will use the purchase method of accounting for all reporting and consolidation journal entries (not the pooling of interests method).
Quicker Distribution Company Incorporated
Financial Statements
As of 12/31/XX
Assets
Cash $33,000
Accounts receivable $176,000
Inventory $205,000
Market securities $15,000
Total current assets $429,000
Fixed assets
Building $364,000
Equipment $205,000
Accumulated depreciation ($108,000)
Net fixed assets $461,000
Intangible assets $22,000
Total assets $912,000
Current liabilities
Accounts payable $142,000
Payroll taxes payable $18,000
Notes payable - current $25,000
Total current liabilities $185,000
Long-term liabilities
Notes payable $287,000
Due to shareholders $84,000
Total long term $371,000
Total liabilities $556,000
Equity
Paid-in capital $85,000
Common stock 5000 shs O/S $5,000
Retained earnings $173,000
Income $93,000
Total equity $356,000
Total liabilities and equity $912,000
Complete the tasks, then show the following in a document:
1) Calculate Quicker's book value and purchase price.
2) Show journal entries to record the purchase of Quicker at date of acquisition and show the worksheet elimination of Quicker's equity.
3) Assuming Quicker's profits are $65,000, calculate Tribbs' portion of profits at the end of the first year.