On January 1, 2011, Plymouth Corporation acquired 80 percent of the outstanding voting stock of Sander Company

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On January 1, 2011, Plymouth Corporation acquired 80 percent of the outstanding voting stock of Sander Company in exchange for $1,200,000 cash. At that time, although Sander's book value was $925,000, Plymouth assessed Sander's total business fair value at $1,500,000.

Since that time, Sander has neither issued nor reacquired any shares of its own stock. The book values of Sander's individual assets and liabilities approximated their acquisition date fair values except for the patent account, which was undervalued by $350,000. The undervalued patents had a 5-year remaining life at the acquisition date. Any remaining excess fair value was attributed to goodwill. No goodwill impairments have occurred.

Sander regularly sells inventory to Plymouth. Below are details of the intra-entity inventory sales for the past three years:


On January 1, 2011, Plymouth Corporation acquired 80 percent of

Separate financial statements for these two companies as of December 31, 2013, follow:

On January 1, 2011, Plymouth Corporation acquired 80 percent of


a. Prepare a schedule that calculates the Equity in Earnings of Sander account balance.
b. Prepare a worksheet to arrive at consolidated figures for external reporting purposes.

Goodwill
Goodwill is an important concept and terminology in accounting which means good reputation. The word goodwill is used at various places in accounting but it is recognized only at the time of a business combination. There are generally two types of...
Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
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Fundamentals of Advanced Accounting

ISBN: 978-0077667061

5th edition

Authors: Joe Ben Hoyle, Thomas Schaefer, Timothy Doupnik

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