Concept explainers
(a)
Concept Introduction: The value analysis is more of a systematic production review which includes the purchase process and the design of product to make sure the costs are reduced. This can be done using a set of activities including the product designs to make use of parts that have low-tolerance which are affordable, to switch to the components that cost low, including standardization of the parts to ensure the volume discounts are achieved.
To Prepare: The value analysis schedule and the determination and distribution of excess schedules.
(a)

Explanation of Solution
Given: Quail company purchases 80 of the common stock of Commo Company for $800000. At the time of purchase, Commo has framed its
Calculating fair value of total assets.
Fair value of total assets = Cash equivalents + Inventory + Land + Building + Equipment
Calculating net liabilities,
Net liabilities = Current liabilities + Bonds payable
Now, calculate the fair value of net assets:
Fair value of net assets = Fair value of total assets - Liabilities payable = $1420000-$600000 = $820000
Value analysis schedule.
Value analysis Schedule | Company-implied fair value | Parent Price (80%) | Non-controlling interest value (20%) |
Company fair value | $1000000 | $800000 | $200000 |
Fair value of net assets excluding | $820000 | $656000 | $164000 |
Goodwill | $180000 | $1440000 | $36000 |
Along with total equity and excess of fair value over book value.
Value analysis Schedule | Company-implied fair value | Parent Price (80%) | Non-controlling interest value (20%) |
Fair value of subsidiary | $1000000 | $800000 | $200000 |
Less: Book value of interest acquired Common stock Paid-in capital excess of par | $100000 $150000 $250000 | ||
Total equity | $500000 | $500000 | $500000 |
Interest acquired | 80% | 20% | |
Book value (b) | $500000 | $400000 | $100000 |
Excess of fair value over book value (a)-(b) | $500000 | $400000 | $100000 |
Inventory Adjustment = Fair value - book value
Land Adjustment = Fair value - book value
Building Adjustment = Fair value - book value
Equipment Adjustment = Fair value - book value
Adjustment of Identifiable Accounts
Particulars | Adjustments | Worksheet key |
Inventory | $1000000 | Debit D1 |
Land | $100000 | Debit D2 |
Building | $200000 | Debit D3 |
Equipment | (30000) | Credit D4 |
Goodwill | $180000 | Debit D5 |
Total | $500000 |
(b)
Concept Introduction: The value analysis is more of a systematic production review which includes the purchase process and the design of product to make sure the costs are reduced. This can be done using a set of activities including the product designs to make use of parts that have low-tolerance which are affordable, to switch to the components that cost low, including standardization of the parts to ensure the volume discounts are achieved.
The value analysis schedule and the determination and distribution of excess schedules.
(b)

Explanation of Solution
Given: Quail company purchases 80% of the common stock of Commo Company for $800000. At the time of purchase, Commo has framed its balance sheet.
Market value of shares = Total number of shares x value per share
= 4000 shares x $45 per share = $980000
Goodwill under market value
Value analysis Schedule | Company-implied fair value | Parent Price (80%) | Non-controlling interest value (20%) |
Fair value of company | $980000 | $800000 | $180000 |
Fair value of net assets excluding goodwill | $820000 | $656000 | $164000 |
Goodwill | $160000 | $144000 | $16000 |
Value analysis schedule
Value analysis Schedule | Company-implied fair value | Parent Price (80%) | Non-controlling interest value (20%) |
Fair value of subsidiary (a) | $980000 | $800000 | $180000 |
Less: Book value of interest acquired Common stock Paid-in capital excess of par retained earnings | $100000 $150000 $250000 | ||
Total equity | $500000 | $500000 | $500000 |
Interest acquired | 80% | 20% | |
Book value (b) | $500000 | $400000 | $100000 |
Excess of fair value over book value (a)-(b) | $500000 | $400000 | $100000 |
Adjustment of identifiable accounts
Particulars | Adjustments | Worksheet Key |
Inventory | $50000 | Debit D1 |
Land | $100000 | Debit D2 |
Building | $200000 | Debit D3 |
equipment | ($30000) | Credit D4 |
Goodwill | $160000 | Debit D6 |
Total | $480000 |
c.
Concept Introduction: The value analysis is more of a systematic production review which includes the purchase process and the design of product to make sure the costs are reduced. This can be done using a set of activities including the product designs to make use of parts that have low-tolerance which are affordable, to switch to the components that cost low, including standardization of the parts to ensure the volume discounts are achieved.
The value analysis schedule and the determination and distribution of excess schedules.
c.

Explanation of Solution
Given: Quail company purchases 80 of the common stock of Commo Company for $800000. At the time of purchase, Commo has framed its balance sheet.
Value analysis schedule
Value analysis Schedule | Company-implied fair value | Parent Price (80%) | Non-controlling interest value (20%) |
Fair value of subsidiary (a) | $964000 | $800000 | $164000 |
Less: Book value of interest acquired Common stock Paid-in capital excess of par retained earnings | $100000 $150000 $250000 | ||
Total equity | $500000 | $500000 | $500000 |
Interest acquired | 80% | 20% | |
Book value (b) | $500000 | $400000 | $100000 |
Excess of fair value over book value (a)-(b) | $464000 | $400000 | $64000 |
Adjustment of Identifiable Accounts
Particulars | Adjustments | Worksheet Key |
Inventory | $50000 | Debit D1 |
Land | $100000 | Debit D2 |
Building | $200000 | Debit D3 |
equipment | ($30000) | Credit D4 |
Goodwill | $144000 | Debit D6 |
Total | $464000 |
Want to see more full solutions like this?
Chapter 2 Solutions
ADVANCED ACCOUNTING
- Mat lives in Barbados and is desirous of starting his own business from inheritances that his parents left him. He approached you for advice on the best type of business to register. Mr. Mat said he would love to gain benefits from any tax relief that is available that the government has to offer. Give advice to Mr. Mat whether it would be more beneficial to start a Company or an Individual Trading Business. outline for Mr. Mat why setting up either a company, or a trading as business is more advantageous over the other. cover matters like: Tax rates, Available tax reliefs and or tax credits Ease of operations of a company, as well as ease of operations of an individual trading business.arrow_forwardGeneral accountingarrow_forwardSolve nowarrow_forward
- Individual Income TaxesAccountingISBN:9780357109731Author:HoffmanPublisher:CENGAGE LEARNING - CONSIGNMENTIntermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning

