Question

Refer to the preceding common information for Paulcraft’s acquisition of Switzer’s common stock. Assume that Paulcraft pays $440,000 for 80% of Switzer common stock. Paulcraft uses the simple equity method to account for its investment in Switzer. Paulcraft and Switzer have the following trial balances on December 31, 2013:
Required
1. Prepare a value analysis and a determination and distribution of excess schedule for the investment in Switzer.
2. Complete a consolidated worksheet for Paulcraft Corporation and its subsidiary Switzer Corporation as of December 31, 2013. Prepare supporting amortization and income distribution schedules.
Paulcraft Corporation builds large powerboats. On January 1, 2011, Paulcraft acquires Switzer Corporation, a company that manufactures smaller power boats. Paulcraft pays cash in exchange for Switzer common stock. Switzer has the following balance sheet on January 1, 2011:
Appraisal values for identifiable assets and liabilities are as follows:
Accounts receivable . .. ... .. . . .. .. . . ... .. .. ...$ 82,000
Inventory (sold during 2011).. .. . . .. . . . .... .. .. 38,000
Land. .. . .. .. .. .... .. . . . . . .. .. . . .. . .... .. . ...150,000
Buildings (20-year life) .. .... .. . . .. . . . .... .. .. 280,000
Equipment(5-year life).. . . . . .. .... . .. . . . . .. . . 100,000
Current liabilities . .. . . . . . .. .. .. ... . . . . .. . . .. . 90,000
Bonds payable (5-year life) . . . . .. .. ... .. . . .. .. 96,000
Any remaining excess is attributed to goodwill.


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  • CreatedApril 13, 2015
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