1. On Jan 1, 2021, Dart Co.
paid $620,000 for all the issued and outstanding common stock of Wall
Corp. The re corded assets and liabilities of Wall Corp. on Jan 1, 20x1, follow: Cash $ 60,000
Inventory 180,000 Property and equipment (net of accumulated depreciation of $220,000) 320,000
Goodwill 100,000 Liabilities (120,000) Net assets $ 540,000 On Jan 1, 20x1, Wall’s inventory had a
fair value of $150,000, and the property and equipment (net) had a fair value of $380,000. What is the
amount of goodwill resulting from the business combination?
8. On January 1, 2011, Lake Corporation acquired 100% of the outstanding common stock of Shore
Corporation for $800,000. On the date of acquisition, the fair value of Shore’s net identifiable assets is
$820,000. The book value of Shore Corporation’s net assets is $760,000. In Lake’s 2011 financial
statements, Lake should recognize
Presented below are selected amounts from the separate unconsolidated financial statements of Poe Corp.
and its 90% owned subsidiary, Shaw Co., at December 31, 2011. Additional information follows:
Additional information
• On January 2, 2011, Poe, Inc. purchased 90% of Shaw Co.’s 100,000 outstanding common stock for
cash of $155,000. On that date the fair value of the noncontrolling interest was $1.70 per share. On that
date, Shaw’s stockholders’ equity equaled $150,000 and the fair values of Shaw’s identifiable assets and
liabilities equaled their carrying amounts. Poe has accounted for the purchase as an acquisition.
• On January 3, 2011, Poe sold equipment with an original cost of $30,000 and a carrying value of
$15,000 to Shaw for $36,000. The equipment had a remaining life of three years and was depreciated
using the straight-line method by both companies.
• During 2011, Poe sold merchandise to Shaw for $60,000, which included a profit of $20,000. At
December 31, 2011, half of this merchandise remained in Shaw’s inventory.
• On December 31, 2011, Poe paid $91,000 to purchase 50% of the outstanding bonds issued by Shaw.
The bonds mature on December 31, 2015, and were originally issued at par. The bonds pay interest
annually on December 31 of each year, and the interest was paid to the prior investor immediately before
Poe’s purchase of the bonds.
• On September 4, 2011, Shaw paid cash dividends of $30,000.
• On December 31, 2011, Poe recorded its equity in Shaw’s earnings.
Calculate the amounts that will appear on Poe’s consolidated financial statement on December 31, 2011.
1.Cash
2.Goodwill
3. Equipment
4. Common stock
5. Investment in Shaw
6. Dividends
7. Bonds payable
8. Noncontrolling interest
On January 1, 2011, Arcelia Corporation acquired Gavino corporation by purchasing 100% of the stock
of Gavino in ex change for 20,000 shares of Arcelia stock. On the date of acquisition Arcelia stock traded
for $18 per share on the stock ex change. The fair market value of Gavino’s inventory is $10,000 higher
than the book value. The book values of each company on January 1, 2011, are shown below.
Additional information • During 2011, the following transactions occurred:
1. Arcelia sold inventory to Gavino for $50,000 on account. The normal profit on sales for Arcelia is
40%. At December 31, 2011, Gavino had 20% of the goods remaining in ending inventory. At December
31, 2011, Gavino had not paid Arcelia for $8,000 of the inventory.
2. On October 1, 2011, Gavino Corp. sold equipment to Arcelia for $24,000. The equipment was
purchased by Gavino on 1/1/08 for $60,000 and was depreciated straight-line over five years with no
salvage value. Arcelia depreciated the new equipment over three years with no salvage value.
• During 2011, Arcelia did not make entries to record the income of Gavino.
• At December 31, 2011, totals from the preclosing trial balances of both firms are as follows:
Below is a consolidation worksheet dated December 31, 2011 (before closing the books of Arcelia and
Gavino). Prepare the following worksheet with working paper eliminations and entries.
