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Exercise 3-4 Purchase, Date of Acquisition On January, 1 2010,

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Exercise 3-4 Purchase, Date of...
Exercise 3-4 Purchase, Date of Acquisition
On January, 1 2010, Peach Company issued 1,500 of its $20 par value common shares with a fair value of $60 per share in exchange for the 2,000 outstanding common shares of Swartz Company in a purchase transaction. Registration costs amounted to $1,700, paid in cash. Just prior to the acquisition, the balance sheets of the two companies were as follows:
Peach Company Swartz Company
Cash $73,000 $13,000
Accounts receivable (net) $95,000 $19,000
Inventory $58,000 $25,000
Plant and equipment (net) $95,000 $43,000
Land $26,000 $22,000
Total assets $347,000 $122,000
Accounts payable $66,000 $18,000
Notes payable $82,000 $21,000
Common stock, $20 par value $100,000 $40,000
Other contributed capital $60,000 $24,000
Retained earnings $39,000 $19,000
Total equities $347,000 $122,000
Any difference between the book value of equity and the value implied by the purchase price relates to goodwill.
Required:
a. Prepare the journal entry on Peach Company’s books to record the exchange of stock.
b. Prepare a Computation and Allocation Schedule for the difference between book value and value implied by the purchase price.
c. Prepare a consolidated balance sheet at the date of acquisition.

Exercise 4-6
Elimination Entry, Consolidated Balance Sheet
On December 31, 2010, Price Company purchased a controlling interest in Shipley Company. The balance sheet of Price Company and the consolidated balance sheet on December 31, 2010, were as follows:
Price Company Consolidated
Cash $22,000 $37,900
Accounts receivable $35,000 $57,000
Inventory $127,000 $161,600
Investment in Shipley Company $212,000 0
Plant and equipment (net) $190,000 $337,000
Land $120,000 $220,412
Total $706,000 $813,912
Accounts payable $42,000 $112,500
Note payable $100,000 $100,000
Noncontrolling interest in Shipley Company $0 $37,412
Common stock $300,000 $300,000
Other contributed capital $164,000 $164,000
Retained earnings $100,000 $100,000
Total $706,000 $813,912
On the date of acquisition, the stockholder’s equity section of Shipley Company’s balance sheet was as follows:
Common stock $90,000
Other contributed capital $90,000
Retained earnings $56,000
Total $236,000
Required:
A. Prepare the investment elimination entry made to complete a consolidated balance sheet workpaper. Any difference between book value and the value implied by the purchase price relates to subsidiary land.
B. Prepare Shipley Company’s balance sheet as it appeared on December 31, 2010.

Problem 3-8 Intercompany items, Two subsidiaries
On February 1, 2011, Punto Company purchased 95% of the outstanding common stock of Sara Company and 85% of the outstanding common stock of Rob Company. Immediately before the two acquisitions, balance sheets of the three companies were as follows:
Punta Sara Rob
Cash $165,000 $45,000 $17,000
Accounts receivable $35,000 $35,000 $26,000
Notes receivable $18,000 $0 $0
Merchandise inventory $106,000 $35,500 $14,000
Prepaid insurance $13,500 $2,500 $500
Advances to Sara Company $10,000
Advances to Rob Company $5,000
Land $248,000 $43,000 $15,000
Buildings (net) $100,000 $27,000 $16,000
Equipment (net) $35,000 $10,000 $2,500
Total $735,500 $198,000 $91,000
Accounts payable $25,500 $20,000 $10,500
Income taxes payable $30,000 $10,000 $0
Notes payable $0 $6,000 $10,500
Bonds payable $100,000 $0 $0
Common stock, $10 par value $300,000 $144,000 $42,000
Other contributed capital $150,000 $12,000 $38,000
Retained earnings (deficit) $130,000 $6,000 ($10,000)
Total $735,500 $198,000 $91,000
The following additional information is relevant.
1. One week before the acquisitions, Punto Company had advanced $10,000 to Sara Company and $5,000 to Rob Company. Sara Company recorded an increase to Accounts Payable for its advance, but Rob Company had not recorded the transaction.
2. On the date of acquisition, Punto Company owed Sara Company $12,000 for purchases on account, and Rob Company owed Punto Company $3,000 and Sara Company $6,000 for such purchases. The goods purchased had all been sold to outside parties prior to acquisition.
3. Punto Company exchanged 13,400 shares of its common stock with a fair value of $12 per share for 95% of the outstanding common stock of Sara Company. In addition, stock issue fees of $4,000 were paid in cash. The acquisition was accounted for as a purchase.
4. Punto Company paid $50,000 cash for the 85% interest in Rob Company.
5. Three thousand dollars of Sara Company’s notes payable and $9,500 of Rob Company’s notes payable were payable to Punto Company.
6. Assume that for Sara, any difference between book value and the value implied by the purchase price relates to subsidiary land. However, for Rob, assume that any excess of book value over the value implied by the purchase price is due to overvalued buildings.
Required:
a. Give the book entries to record the two acquisitions in the accounts of Punto Company.
b. Prepare a consolidated balance sheet workpaper immediately after acquisition.
c. Prepare a consolidated balance sheet at the date of acquisition for Punto Company and its subsidiaries.



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