The balance sheets of Cheese Company and Ham Company as of December 31, 2011, follow.

Assume that Cheese purchased 100 percent of Ham’s common stock for $1,400,000 immediately prior to December 31, 2011. Also assume that $100,000 of the excess of cost over book value is attributable to the increased value of Ham’s property, plant, and equipment. Cheese considers the rest of the excess to be goodwill.

1. Prepare a work sheet for a consolidated balance sheet as of the acquisition date.
2. If you were reading Cheese’s consolidated balance sheet, what account would indicate that Cheese paid more than fair value for Ham, and where would you find it on the balance sheet? Also, would you expect the amount of this account to change from year to year? If so, what would cause it tochange?

  • CreatedSeptember 10, 2014
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