Exercise 2-7 - 80% purchase, goodwill. Quincy Company purchased 80% of the common stock of Cooker Company for $700,000 plus direct acquisition costs of $30,000. At the time of the purchase, Cooker Company had the following balance sheet: Assets Liabilities and Equity Cash equivalents. . . . . . . . . . . . . . . $ 120,000 Current liabilities . . . . . . . . . . . . . . . $200,000 Inventory . . . . . . . . . . . . . . . . . . . . . 200,000 Bonds payable . . . . . . . . . . . . . . . . 400,000 Land. . . . . . . . . . . . . . . . . . . . . . . . . 100,000 Common stock ($5 par). . . . . . . . . . 100,000 Building (net) . . . . . . . . . . . . . . . . . . 450,000 Paid-in capital in excess of par . . . . 150,000 Equipment (net) . . . . . . . . . . . . . . . . 230,000 Retained earnings . . . . . . . . . . . . . . 250,000 Total assets. . . . . . . . . . . . . . . . . . $1,100,000 Total liabilities and equity . . . . . . $1,100,000 Fair values differ from book values for all assets other than cash equivalents. The fair values are as follows: Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . $300,000 Land. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200,000 Building. . . . . . . . . . . . . . . . . . . . . . . . . . . 600,000 Equipment . . . . . . . . . . . . . . . . . . . . . . . . . 200,000 Based on the preceding facts, 1. Prepare a zone analysis and a determination and distribution of excess schedule. 2. Prepare the elimination entries that would be made on a consolidated worksheet prepared on the date of purchase. I have attached that needs to be filled out according to the information provided. The template needs to be filled out and there are two tabs as you can see in the excel file.

Prob 2-7 D&D A 1 2 3 4 5 B C D E F G Book Value H Market Value Problem 2-7 100% Purchase with Goodwill Common Information Ownership interest Price paid (including direct acquisition costs) 100.00% 410,000 6 7 8 Acquired company's balance sheet before purchase 9 10 11 12 Priority assets: 13 14 15 Total priority assets 16 17 Nonpriority assets: 18 19 20 21 22 23 24 Total nonpriority assets 25 Book Value Market Value Life - - - - Total liabilities 0 Stockholders' equity: Paid-in capital in excess of par Retained earnings Total equity 0 Net assets - 0 26 Existing goodwill 27 Total assets 28 29 30 31 32 33 34 Zone Analysis 35 37 38 39 40 41 42 43 44 45 46 47 - - Group Ownership Total Portion Nonpriority accounts - Cumulative Total 0 0 0 Price Analysis Price = Assign to priority accounts Assign to nonpriority accounts Goodwill Extraordinary gain 410,000 0 full value Determination and Distribution of 48 Excess Schedule 49 50 Price paid for investment: 51 52 53 54 55 56 57 Less book value interest acquired: Common stock Paid-in capital in excess of par Retained earnings Total equity Interest acquired 100.00% Excess of cost over book value (debit) - 58 59 Excess available 60 - Adjustments: 61 62 63 64 65 66 67 68 Total 69 70 Allocation Tables 71 72 73 74 75 76 Total to other fixed assets 77 Market Percent - Available - Assign Book - Page 1 Adjust - - Prob 2-7 Worksheet A 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 B C D E F G H I Problem 2-7 (concluded) Year of consolidation Cash Accounts receivable Inventory Land Investment in Sader Buildings Accumulated depreciation - bldgs. Equipment Accumulated depreciation - equip. Copyright Goodwill Current liabilities Bonds payable Common stock - Sader Paid-in capital in excess of par - Sader Retained earnings - Sader Common stock - Pantera Balance sheet Pantera Sader 51,000 65,000 20,000 80,000 50,000 100,000 40,000 410,000 250,000 (80,000) 90,000 (40,000) 200,000 (50,000) 60,000 (20,000) (80,000) (200,000) Eliminations Dr (40,000) (100,000) (10,000) (90,000) (60,000) (20,000) Paid-in capital in excess of par - Pantera (180,000) 26 Retained earnings- Pantera (446,000) 27 Totals 28 NCI 29 Controlling retained earnings 30 Totals 31 32 - - Eliminations and Adjustments: Page 2 NCI Cr Consol. Bal. Sht. J