Exercise 7 (LO 5, 6, 7, 8) 80% purchase with a gain and preexisting goodwill. Ve- nus Company purchases 8,000 shares of Sundown Company for $64 per share. Just prior to the purchase, Sundown Company has the following balance sheet:
Assets Liabilities and Equity
|
Cash . . . . . . . . . . . . . . . . . . . . . . . . .
|
$ 20,000
|
Current liabilities . . . . . . . . . . . . . . . .
|
$250,000
|
|
Inventory . . . . . . . . . . . . . . . . . . . . . .
|
280,000
|
Common stock ($5 par). . . . . . . . . . .
|
50,000
|
|
Property, plant, and equipment (net) .
|
400,000
|
Paid-in capital in excess of par . . . . .
|
130,000
|
|
Goodwill . . . . . . . . . . . . . . . . . . . . . .
|
100,000
|
Retained earnings . . . . . . . . . . . . . . .
|
370,000
|
Total assets. . . . . . . . . . . . . . . . . . . $800,000 Total liabilities and equity . . . . . . . $800,000
Venus Company believes that the inventory has a fair value of $400,000 and that the prop- erty, plant, and equipment is worth $500,000.
1. Prepare the value analysis schedule and the determination and distribution of excess sched- ule.
2. Prepare the elimination entries that would be made on a consolidated worksheet prepared on the date of acquisition.