Question: Palto issues 20 000 of its 5 par value common stock

Palto issues 20,000 of its $5 par value common stock shares, with a fair value of $35 each, for a 100% interest in Sword Company on January 1, 2011. The balance sheet of Sword Company on that date is as follows:
On the purchase date, the buildings and equipment are understated $50,000 and have a remaining life of 10 years. Sword has tax loss carryovers of $200,000. They are believed to be fully realizable at a tax rate of 30%. $40,000 of the tax loss carryovers will be utilized in 2011.
The purchase is a tax-free exchange. The tax rate applicable to all transactions is 30%. Any remaining excess is attributed to goodwill.
Prepare a value analysis and a determination and distribution of excess schedule for this investment.

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  • CreatedApril 13, 2015
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