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Computation and Allocation of Difference (CAD) Schedule. % of ownership = 75% 25% 100% Non Controlling Parent Interest (NCI) Total Implied Value Fair Value Given

Computation and Allocation of Difference (CAD) Schedule.

% of ownership =

75%

25%

100%

Non Controlling

Parent

Interest (NCI)

Total Implied Value

Fair Value Given Up

$ 31,000,000

$ 10,333,333

$ 41,333,333

Book Value Received

$ 10,331,250

$ 3,443,750

$ 13,775,000

Difference

$ 20,668,750

$ 6,889,583

$ 27,558,333

Account (1) Debit Credit Common Stock Smooth Solutions $ 125,000

APIC Smooth Solutions $ 11,500,000 RE Smooth Solutions $ 2,150,000 Difference $ 27,558,000

Investment in Subsidiary Smooth Solutions $31,000,000

NCI $10,333,333

The CAD first compares the fair value given up to the book value received. The next question is to investigate whether there are any assets and liabilities that have a fair value that is different from book value. This information is used to both determine if there is goodwill (or gain) and to complete the 2nd part of the workpaper entry. The second workpaper entry is to properly allocate the difference account.

Q9. Prepare Entry - Complete the workpaper entry to allocate the difference account. Note: This entry will be a number of line items.

Account (2) Debit Credit

Q10. - True or False - The balance sheet of Paper & Inc. Corp. has a line item Investment in Subsidiary with a balance of $31,000,000. This balance is the total implied value of the subsidiary. Explain your answer.

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