Chapter 7 - Advanced Accounting

Exercise 2 (LO 2) Block purchase, control with first block.

Baker Corporation purchases a 60% interest in Hardee Company on January 1, 2015, for $135,000. On that date, Hardee Company has the following stockholders equity:

Common stock ($10 par)	$100,000
Retained earnings	20,000
Total	$120,000

Any excess of cost over fair value is due to equipment with a 10-year life.

Baker Corporation purchases another 20% interest in Hardee Company for $40,000 on January 1, 2017, when Hardee Company has the following stockholders equity:

Common stock ($10 par)	$100,000
Retained earnings	50,000
Total	$150,000

On December 31, 2019, Baker Corporation and Hardee Company have the following balance sheets:

Assets	Baker Corporation		Hardee Company
Current assets	$ 285,000		$ 80,000
Investment in Hardee Company	175,000
Property, plant, and equipment	740,000		240,000
Total assets	$1,200,000		$320,000
Liabilities and Stockholders Equity		Baker Corporation		Hardee Company
Current liabilities		$ 400,000		$100,000
Stockholders equity:
Common stock ($10 par)		500,000		100,000
Retained earnings		300,000		120,000
Total liabilities and stockholders equity		$1,200,000		$320,000

Prepare a determination and distribution of excess schedule for the January 1, 2015, acquisition and analysis of the 20% acquisition on January 1, 2017. Prepare the consolidated balance sheet of Baker Corporation and subsidiary Hardee Company on December 31, 2019.