On January 1, 2015, Bell Company acquires an 80% interest in Carter Company for $140,000. The purchase price results in a $30,000 (including NCI adjustment) increase in the patent which has a 10-year life.The investment is recorded under the simple equity method.On January 1, 2017, Ace Company purchases a 60% interest in Bell Company for $420,000. Ace Company believes that the patent value remaining on the investment by Bell in Carter is stated correctly. Comparative equities of Bell Company and Carter Company immediately prior to the purchase reveal the following:Stockholders’ Equity Bell Company Carter CompanyCommon stock ($5 par). . . . . . . . . . . . . . . . . $200,000Common stock ($10 par). . . . . . . . . . . . . . . $100,000Paid-in capital in excess of par . . . . . . . . . . . 100,000 20,000Retained earnings . . . . . . . . . . . . . . . . . . . . . . . 150,000 80,000Total stockholders’ equity. . . . . . . . . . . . . . . $450,000 $200,000An analysis of the separate accounts of Bell and Carter on January 1, 2017, reveals that Carter’s inventory is undervalued by $20,000 and that Bell’s equipment with a 5-year future life is undervalued by $30,000. All other book values approximate fair values for Bell and Carter. Prepare the determination and distribution of excess schedule for Ace’s purchase of Bell Company on January 1, 2017.
On January 1, 2015, Bell Company acquires an 80% interest in Carter Company for $140,000. The purchase price results in a $30,000 (including NCI adjustment) increase in the patent which has a 10-year life.
The investment is recorded under the simple equity method.
On January 1, 2017, Ace Company purchases a 60% interest in Bell Company for $420,000. Ace Company believes that the patent value remaining on the investment by Bell in Carter is stated correctly. Comparative equities of Bell Company and Carter Company immediately prior to the purchase reveal the following:
Common stock ($5 par). . . . . . . . . . . . . . . . . $200,000
Common stock ($10 par). . . . . . . . . . . . . . . $100,000
Paid-in capital in excess of par . . . . . . . . . . . 100,000 20,000
Total stockholders’ equity. . . . . . . . . . . . . . . $450,000 $200,000
An analysis of the separate accounts of Bell and Carter on January 1, 2017, reveals that Carter’s inventory is undervalued by $20,000 and that Bell’s equipment with a 5-year future life is undervalued by $30,000. All other book values approximate fair values for Bell and Carter. Prepare the determination and distribution of excess schedule for Ace’s purchase of Bell Company on January 1, 2017.
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