Problem #2 - 80% purchase with stock, bargain purchase, 18 points Andolini, Inc. (the Parent) purchases...

 

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Problem #2 - 80% purchase with stock, bargain purchase, 18 points Andolini, Inc. (the "Parent") purchases 80% of Turk Sollozzo (the "Sub") on December 31, 2017. Sollozzo had the following summarized balance sheet on December 31: Assets Accounts Receivable Inventory $350,000 $500,000 Liabilities and Equity Notes Payable $400,000 Common Stock, $5 par $300,000 Property, Plant and Equip (net) $550,000 Add Paid-In Capital $200,000 Retained Earnings $500,000 Total Assets $1,400,000 Total Liab & Equity $1,400,000 The fair value of the Accounts Receivable is $340,000, inventory is $430,000 and the fair value of the Property, Plant and Equipment is $730,000. All other values are the same. Assume that Andolini, Inc. pays $840,000 cash for 80% of the common stock of Turk Sollozzo. Required - complete the Determination and Distribution schedule (8 points) a) What value is NCI? (1 point) b) What is the Gain on this purchase? (1 point) c) Prepare the elimination entries to eliminate the Investment in Turk Sollozzo, adjust the accounts to fair market value and eliminate the equity accounts of Turk. Instead of doing these entries on a worksheet, just make them look like journal entries. (8 points) Problem #2 - 80% purchase with stock, bargain purchase, 18 points Andolini, Inc. (the "Parent") purchases 80% of Turk Sollozzo (the "Sub") on December 31, 2017. Sollozzo had the following summarized balance sheet on December 31: Assets Accounts Receivable Inventory $350,000 $500,000 Liabilities and Equity Notes Payable $400,000 Common Stock, $5 par $300,000 Property, Plant and Equip (net) $550,000 Add Paid-In Capital $200,000 Retained Earnings $500,000 Total Assets $1,400,000 Total Liab & Equity $1,400,000 The fair value of the Accounts Receivable is $340,000, inventory is $430,000 and the fair value of the Property, Plant and Equipment is $730,000. All other values are the same. Assume that Andolini, Inc. pays $840,000 cash for 80% of the common stock of Turk Sollozzo. Required - complete the Determination and Distribution schedule (8 points) a) What value is NCI? (1 point) b) What is the Gain on this purchase? (1 point) c) Prepare the elimination entries to eliminate the Investment in Turk Sollozzo, adjust the accounts to fair market value and eliminate the equity accounts of Turk. Instead of doing these entries on a worksheet, just make them look like journal entries. (8 points)

Answer rating: 100% (QA)

Lets break down the problem step by step Determination and Distribution Schedule a Value of NonControlling Interest NCI Since Andolini Inc purchases 80 of Turk Sollozzo the NCI is 20 NCI 20 of Total E... View the full answer