Prior to January 2, 2018, Prestar and Saturn are separate corporations. Saturn Corporation is contemplating a major expansion and seeks to be purchased by a larger corporation with available cash. Prestar Corporation issues $1,350,000 of bonds and uses the proceeds to buy 30,000 newly issued Saturn shares for $45 per share. The price reflects a control premium since the fair value of the NCI shares is $40. Just prior to the issue of the bonds and the issue and purchase of Saturn stock, Prestar and Saturn have the following separate balance sheets: Assets Prestar Corporation Saturn CorporationCurrent assets . . . . . . . . . . . . . . . . . . . $ 600,000 $100,000Land. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150,000 60,000Property, plant, and equipment . . . . 700,000 400,000Total assets. . . . . . . . . . . . . . . . . . . . . . . $1,450,000 $560,000Liabilities and Stockholders’ EquityCurrent liabilities . . . . . . . . . . . . . . . . . . $ 250,000 $100,000Common stock ($5 par). . . . . . . . . . . . . 400,000 100,000Retained earnings . . . . . . . . . . . . . . . . . . 800,000 360,000Total liabilities and equity . . . . . . . . . .$1,450,000 $560,000Purchasing the 30,000 new shares gives Prestar Corporation a 60% controlling interest (30,000 of a total 50,000 common shares). On the purchase date, Saturn’s property is undervalued by $200,000 and has a remaining life of 20 years. Any remaining excess cost can be attributed only to goodwill.Prepare a determination and distribution of excess schedule for Prestar Corporation’s investment in Saturn. Prepare a consolidated balance sheet for the consolidated firm immediately after the acquisition by Prestar Corporation.
Prior to January 2, 2018, Prestar and Saturn are separate corporations. Saturn Corporation is contemplating a major expansion and seeks to be purchased by a larger corporation with available cash. Prestar Corporation issues $1,350,000 of bonds and uses the proceeds to buy 30,000 newly issued Saturn shares for $45 per share. The price reflects a control premium since the fair value of the NCI shares is $40. Just prior to the issue of the bonds and the issue and purchase of Saturn stock, Prestar and Saturn have the following separate balance sheets:
Assets Prestar Corporation Saturn Corporation
Current assets . . . . . . . . . . . . . . . . . . . $ 600,000 $100,000
Land. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150,000 60,000
Property, plant, and equipment . . . . 700,000 400,000
Total assets. . . . . . . . . . . . . . . . . . . . . . . $1,450,000 $560,000
Liabilities and Stockholders’ Equity
Current liabilities . . . . . . . . . . . . . . . . . . $ 250,000 $100,000
Common stock ($5 par). . . . . . . . . . . . . 400,000 100,000
Retained earnings . . . . . . . . . . . . . . . . . . 800,000 360,000
Total liabilities and equity . . . . . . . . . .$1,450,000 $560,000
Purchasing the 30,000 new shares gives Prestar Corporation a 60% controlling interest (30,000 of a total 50,000 common shares). On the purchase date, Saturn’s property is undervalued by $200,000 and has a remaining life of 20 years. Any remaining excess cost can be attributed only to goodwill.
Prepare a determination and distribution of excess schedule for Prestar Corporation’s investment in Saturn. Prepare a consolidated
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