On January 1, 2010, Point Corporation acquired an 80% interest in Sharp Company for $2,000,000. At that

Question:

On January 1, 2010, Point Corporation acquired an 80% interest in Sharp Company for $2,000,000. At that time Sharp Company had capital stock of $1,500,000 and retained earnings of $700,000. 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 $100,000 and a book value of $80,000. The outstanding bonds were issued at par value on January 1, 2005, pay 10% annually, and mature on January 1, 2015. The bond principal is $500,000 and the current yield rate on similar bonds is 8%.

Required:

A. 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.

B. Prepare the workpaper entries necessary on December 31, 2010, to allocate and depreciate the difference between book value and the value implied by the purchase price.

Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may... Par Value
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...