Question

Use the preceding information for Purnell’s purchase of Sentinel common stock. Assume Purnell exchanges 19,000 shares of its own stock for 80% of the common stock of Sentinel. The stock has a market value of $50 per share and a par value of $1. Purnell has the following trial balance immediately after the purchase:
Purnell Corporation
Trial Balance
December 31, 2011
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000
Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 300,000
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 410,000
Investment in Sentinel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 950,000
Land. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 800,000
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,800,000
Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (500,000)
Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 600,000
Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (230,000)
Current Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (150,000)
Bonds Payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (300,000)
Common Stock ($1 par) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (92,000)
Paid-In Capital in Excess of Par . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,508,000)
Retained Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,100,000)
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
1. Prepare the value analysis schedule and the determination and distribution of excess schedule for the investment in Sentinel.
2. Complete a consolidated worksheet for Purnell Corporation and its subsidiary Sentinel Corporation as of December 31, 2011.
Purnell Corporation acquires Sentinel Corporation on December 31, 2011. Sentinel has the following balance sheet on the date of acquisition:
An appraisal is performed to determine whether the book values of Sentinel’s net assets reflect their fair values. The appraiser also determines that intangible assets exist, although they are not recorded. The following fair values for assets and liabilities are agreed upon:
Accounts receivable . . . . . . . . . . $ 50,000
Inventory . . . . . . . . . . . . . . . . . . . 100,000
Land. . . . . . . . . . . . . . . . . . . . . . . 200,000
Buildings . . . . . . . . . . . . . . . . . . . 400,000
Equipment . . . . . . . . . . . . . . . . . . 200,000
Patent. . . . . . . . . . . . . . . . . . . . . . 150,000
Computer software . . . . . . . . . . . 50,000
Current liabilities . . . . . . . . . . . . . 90,000
Bonds payable . . . . . . . . . . . . . . 210,000


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  • CreatedApril 10, 2015
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