Recording the purchase with goodwill. Woolco, Inc., purchased all the outstanding stock of Paint, Inc., for $980,000. Woolco also paid $10,000 in direct acquisition costs. Jut before the investment, the two companies had the following balance sheets:

Assets Woolco, Inc. Paint, Inc.

Accounts receivable $900,000 $500,000

Inventory 600,000 200,000

Depreciable fixed assets (net) 1,500,000 600,000

Total assets $3,000,000 $1,300,000

Liabilities and Equity

Current Liabilities $950,000 $400,000

Bonds Payable 500,000 200,000

Common stock ($10 par) 400,000 300,000

Paid-in capital in excess of par 500,000 380,000

Retained earnings 650,000 20,000

Total liabilities and equity $3,000,000 $1,300,000

Appraisals for the assets of Paint, Inc., indicate that fair values differ from recorded book values for the inventory and for the depreciable fixed assets, which have fair values of $250,000 and $750,000, respectively.

Instructions:

1. Prepare the entries to record the purchase of the Pain, Inc., common stock and payment of acquisition costs.

2. Prepare the value analysis and the determination and distribution of excess schedule for the investment in Paint, Inc.

3. Prepare the elimination entries that would be made on a consolidated worksheet