On January 1, 2012, Par Company purchased 80% of the common stock of Sar Company for $640,000. On this date, Sar had common stock, other paid-in capital, and retained earnings of $120,000, $220,000, and $360,000, respectively. Net income and dividends for 2 years for Sar Company were as follows: 2012 2013 Net income $200,000 $250,000 Dividends 30,000 60,000 On January 1, 2012, the only tangible assets of Sar that were undervalued were inventory and building. Inventory, for which FIFO is used, was worth $20,000 more than cost. The inventory was sold in 2012. Building, which was worth $40,000 more than book value, has a remaining life of 10 years, and straight-line depreciation is used. Any remaining excess is goodwill. Required: Please show all of your computations in good form Prepare a value analysis schedule Prepare a determination and distribution of excess schedule Prepare Par’s 2012 and 2013 journal entries (after the purchase has been recorded) to record the transactions related to its investment in Sar under the Sophisticated equity method in their books.
On January 1, 2012, Par Company purchased 80% of the common stock of Sar Company for $640,000. On this date, Sar had common stock, other paid-in capital, and retained earnings of $120,000, $220,000, and $360,000, respectively. Net income and dividends for 2 years for Sar Company were as follows: 2012 2013 Net income $200,000 $250,000 Dividends 30,000 60,000 On January 1, 2012, the only tangible assets of Sar that were undervalued were inventory and building. Inventory, for which FIFO is used, was worth $20,000 more than cost. The inventory was sold in 2012. Building, which was worth $40,000 more than book value, has a remaining life of 10 years, and straight-line depreciation is used. Any remaining excess is goodwill. Required: Please show all of your computations in good form Prepare a value analysis schedule Prepare a determination and distribution of excess schedule Prepare Par’s 2012 and 2013 journal entries (after the purchase has been recorded) to record the transactions related to its investment in Sar under the Sophisticated equity method in their books.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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On January 1, 2012, Par Company purchased 80% of the common stock of Sar Company for $640,000. On this date, Sar had common stock, other paid-in capital, and
|
|
2012 |
2013 |
|
Net income |
$200,000 |
$250,000 |
|
Dividends |
30,000 |
60,000 |
On January 1, 2012, the only tangible assets of Sar that were undervalued were inventory and building. Inventory, for which FIFO is used, was worth $20,000 more than cost. The inventory was sold in 2012. Building, which was worth $40,000 more than book value, has a remaining life of 10 years, and straight-line
Required: Please show all of your computations in good form
- Prepare a value analysis schedule
- Prepare a determination and distribution of excess schedule
- Prepare Par’s 2012 and 2013
journal entries (after the purchase has been recorded) to record the transactions related to its investment in Sar under the Sophisticated equity method in their books.
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