Assume that Pam Company purchases 30% of Sun Company's outstanding voting common stock on January 1 from existing stockholders for $3,000,000 cash plus 300,000 shares of Pam Company $10 par common stock with a market value of $12 per share. Additional cash costs of the equity interest consist of $45,000 for registration of the shares and $90,000 for consulting and advisory fees. Assume that the following book value and fair value information for Sun Company at January 1 is available: Item BV SUN FV SUN Cash 1 500.000 1.500.000 Receivables.net 2,200,000 2.200.000 Inventories 3 000 000 4.000.000 Other current assets 3.300 000 3.100.000 Equipment.net 15.000.000 8.000.000 Total assets 115.000.000 18.800,000 Accounts payable 1.000.000 1.000.000 Note payable due in five years 22.000.000 1.800.000 Common stock 10 000 000 Retained earnings 2.000.000 Total liabilities and stockholders equity 15 000.000 Assume that Sun pays dividends of $1,000,000 on July 1 and reports net income of $3.000.000 for the year. The excess cost over book value is amortized as follows: Amortization Rates Excess allocated to: Inventories-sold in the current year ? Other current assets_disposed of in the current year ? Equipment-depreciated over 25 years ? Note payable due in 10 years ? Required 14 Prepanng the entries in the books of the Parent company 2. Preparing a schedule of amortization for the differences between the book value and the fair value of the assets of the subsidiary Assume that Pam Company purchases 30% of Sun Company's outstanding voting common stock on January 1 from existing stockholders for $3,000,000 cash plus 300,000 shares of Pam Company $10 par common stock with a market value of $12 per share. Additional cash costs of the equity interest consist of $45,000 for registration of the shares and $90,000 for consulting and advisory fees. Assume that the following book value and fair value information for Sun Company at January 1 is available: Item BV SUN FV SUN Cash 1 500.000 1.500.000 Receivables.net 2,200,000 2.200.000 Inventories 3 000 000 4.000.000 Other current assets 3.300 000 3.100.000 Equipment.net 15.000.000 8.000.000 Total assets 115.000.000 18.800,000 Accounts payable 1.000.000 1.000.000 Note payable due in five years 22.000.000 1.800.000 Common stock 10 000 000 Retained earnings 2.000.000 Total liabilities and stockholders equity 15 000.000 Assume that Sun pays dividends of $1,000,000 on July 1 and reports net income of $3.000.000 for the year. The excess cost over book value is amortized as follows: Amortization Rates Excess allocated to: Inventories-sold in the current year ? Other current assets_disposed of in the current year ? Equipment-depreciated over 25 years ? Note payable due in 10 years ? Required 14 Prepanng the entries in the books of the Parent company 2. Preparing a schedule of amortization for the differences between the book value and the fair value of the assets of the subsidiary
