Chapter 3, Problem 3B.3.3AP

The trial balances of Campton Corporation and Dorn Corporation as of December 31. 2015. are as shown on page 203.

*$15,000 tax liability ($50,000 income ×30%)- $12,000 tax lass carryover ($40,000 × 30%)

On January 1, 2015, Campton purchases 90% of the outstanding stock of Dorn Corporation for $630,000. The acquisition is a tax-free exchange for the seller. At the purchase date, Dorn’s equipment is undervalued by $100,000 and has a remaining life of 10 years. All other assets have book values that approximate their fair values. Dorn Corporation has a tax loss carryover of $200,000, of which $50,000 is utilizable in 2015 and the balance in future periods. The tax loss carryover is expected to be fully utilized. Any remaining excess is considered to be goodwill. A tax rate of 30% applies to both companies.

3. Prepare the 2015 consolidated statements, including the income statement, retained earnings Statement, and balance sheet.