Question

Prior to January 2, 2014, Penstar and Sargio are separate corporations. Sargio Corporation is contemplating a major expansion and seeks to be purchased by a larger corporation with available cash. Penstar Corporation issues $1,320,000 of bonds and uses the proceeds to buy 30,000 newly issued Sargio shares for $44 per share. The price reflects a control premium since the fair value of the NCI shares is $40. Just prior to the issue of the bonds and the issue and purchase of Sargio stock, Penstar and Sargio have the following separate balance sheets:
Purchasing the 30,000 new shares gives Penstar Corporation a 60% controlling interest (30,000 of a total 50,000 common shares). On the purchase date, Sargio’s property is undervalued by $200,000 and has a remaining life of 20 years. Any remaining excess cost can be attributed only to goodwill.
Prepare a determination and distribution of excess schedule for Penstar Corporation’s investment in Sargio. Prepare a consolidated balance sheet for the consolidated firm immediately after the acquisition by Penstar Corporation.


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  • CreatedApril 13, 2015
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