Alpha Inc., a calendar-year reporting company, acquired 80 percent of Beta Inc.’s outstanding common stock for $1,062,000 on 31/12/2020 when the fair value of Beta’s net assets was $1327,500. The following data summarize the fair value calculation:

	Book value element
Common Stock	390,000
Retained Earnings	351,000
	Under- or Overvaluation	Life remaining
Inventory	-19,500	3 months
Land	117,000	Indefinite
Equipment	255,000	10 years
Covenant-not-to-compete	156,000	5 years
Goodwill element	78,000	Indefinite
Total Cost	1,327,500

Consolidated Worksheet as of December 31, 2020
			Consolidation Entries		Consolidated
	Alfa	Beta	DR	CR
Balance Sheet
Cash	381,000	78,000
Accounts Receivable	292,500	273,000
Inventory	409,500	312,000
Investment in Beta:
Book Value	592,800
Excess Cost	469,200
Land	390,000	273,000
Building & Equipment	975,000	795,600
Acc Depreciation	-585,000	-171,600
Covenant N-T-C
Goodwill
Total Assets	2,925,000	1,560,000
Payables & Accruals	312,000	234,000
Long-term Debt	78,000	585,000
Common Stock	1,170,000	390,000
Retained Earnings	1,365,000	351,000
NCI in NA of Beta
Total Liability & Equity	2,925,000	1,560,000

Required:

1. Prepare all consolidation entries as of 31/12/2020. (10 marks)
2. Prepare a consolidated statement of financial position as of 31/12/2020. ( 20 marks)
3. Identify and briefy explain would you have classified the intercorporate investment if the purchase percentage of Beta had been 30% instead of 80%. (5 marks)
4. Explain the differences between goodwill and bargain purhase. (5 marks)

Answer rating: 100% (QA)

Answer Particulars Debit Credit Net Assets 1249500 Goodwill 78000 To Bank 1062000 To NCI 265500 Comp... View the full answer