Intercompany Notes, 90% Acquisition On January 1, 2005, 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: LO7 Pope Sun Cash $ 297,000 $ 165,000 Accounts Receivable 432,000 468,000 Notes Receivable 90,000 Inventory 1,980,000 1,447,000 Investment in Sun Company 5,800,000 Plant and Equipment (net) 5,730,000 3,740,000 Land 1,575,000 908,000 Total $15,904,000 $6,728,000 Accounts Payable $ 698,000 $ 247,000 Notes Payable 2,250,000 110,000 Common Stock ($15 par) 4,500,000 5,250,000 Other Contributed Capital 5,198,000 396,000 Treasury Stock Held Retained Earnings Total 3,258,000 (1,200,000)
1,925,000 $6,728,000.
Sun Company’s Notes Payable includes a $90,000 note payable to Pope Company. Any difference between cost and book value relates to subsidiary property and equipment.
Required:
A. Prepare a Computation and Allocation Schedule for the difference between cost (purchase price) and book value of equity acquired.
B. Prepare a consolidated balance sheet workpaper on January 1, 2005.