On January 1, 2025, Pope Company purchased 90% of Sun Company’s common stock for $5,800,000 cash. Immediately after the acquisition, the two companies’ balance sheets were as follows:

Sun Company’s note payable includes a $90,000 note payable to Pope Company, plus $20,000 payable to a bank. Any difference between book value and the value implied by the purchase price relates to subsidiary property and equipment.

Required:
A. Prepare a Computation and Allocation Schedule for the difference between book value of equity and the value implied by the purchase price.
B. Prepare a consolidated balance sheet workpaper on January 1, 2025.

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Cash Accounts receivable Notes receivable Inventory Investment in Sun Company Plant and equipment (net) Land Total Accounts payable Notes payable Common stock ($15 par) Other contributed capital Treasury stock held Retained earnings Total Pope $ 297,000 432,000 90,000 1,980,000 5,800,000 5,730,000 1,575,000 $15,904,000 $ 698,000 2,250,000 4,500,000 5,198,000 3,258,000 $15,904,000 Sun $ 165,000 468,000 1,447,000 3,740,000 908,000 $6,728,000 $ 247,000 110,000 5,250,000 396,000 (1,200,000) 1,925,000 $6,728,000