On January 1, 2013, Point Corporation acquired an 80% interest in Sharp Company for $1,960,000. At that time Sharp Company had
common stock of $1,488,000 and retained earnings of $710,000. The book values of Sharp Company's assets and liabilities were
equal to their fair values except for land and bonds payable. The land had a fair value of $101,000 and a book value of $82,000. The
outstanding bonds were issued at par value on January 1, 2008, pay 11% annually, and mature on January 1, 2018. The bond principal
is $494,000 and the current yield rate on similar bonds is 9%.
(a)
Your answer is correct.
Prepare a Computation and Allocation Schedule for the difference between book value and the value implied by the purchase
price in the consolidated statements workpaper on the acquisition date. (Round present value factor calculations to 5 decimal places,
eg. 1.25136 and final answers to 0 decimal places, eg. 5,125)
(b)
Your answer is partially correct.
Prepare the workpaper entries necessary on December 31, 2013, to allocate and depreciate the difference between book value
and the value implied by the purchase price. (Round answers to 0 decimal places, eg. 5,125. If no entry is required, select "No Entry" for
the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent
manually)
Account Titles and Explanation
Debit
Credit
Land
19000
Goodwill
271429
