Use the preceding information for Purnells purchase of Sentinel common stock. Assume Purnell exchanges 22,000 shares of

Use the preceding information for Purnell’s purchase of Sentinel common stock.

Assume Purnell exchanges 22,000 shares of its own stock for 100% of the common stock of Sentinel. The stock has a market value of $50 per share and a par value of $1. Purnell has the following trial balance immediately after the purchase:

Purnell Corporation

Trial Balance

December 31, 2011

Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000

Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 300,000

Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 410,000

Investment in Sentinel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,100,000

Land. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 800,000

Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,800,000

Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . (500,000)

Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 600,000

Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . (230,000)

Current Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (150,000)

Bonds Payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (300,000)

Common Stock ($1 par) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (95,000)

Paid-In Capital in Excess of Par . . . . . . . . . . . . . . . . . . . . . . . . (3,655,000)

Retained Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,100,000)

Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0

Required

1. Prepare the value analysis schedule and the determination and distribution of excess schedule for the investment in Sentinel.

2. Complete a consolidated worksheet for Purnell Corporation and its subsidiary Sentinel Corporation as of December 31, 2011.

Purnell Corporation acquires Sentinel Corporation on December 31, 2011. Sentinel has the following balance sheet on the date of acquisition:

An appraisal is performed to determine whether the book values of Sentinel’s net assets reflect their fair values. The appraiser also determines that intangible assets exist, although they are not recorded. The following fair values for assets and liabilities are agreed upon:
Accounts receivable . . . . . . . . . . $ 50,000
Inventory . . . . . . . . . . . . . . . . . . . 100,000
Land. . . . . . . . . . . . . . . . . . . . . . . 200,000
Buildings . . . . . . . . . . . . . . . . . . . 400,000
Equipment . . . . . . . . . . . . . . . . . . 200,000
Patent. . . . . . . . . . . . . . . . . . . . . . 150,000
Computer software . . . . . . . . . . . 50,000
Current liabilities . . . . . . . . . . . . . 90,000
Bonds payable . . . . . . . . . . . . . . 210,000

Transcribed Image Text:

Senlinel Corporation Balance Sheet December 31, 2011 Assets Liabilities and Equity Accounts receivable.. $ 50,000 Current labilies.. 120,000 Bonds payable 100,000 Common stock$1 par) 300,000 Paid-in capital in excess of par (100,000) Retained earnings 90,000 200,000 10,000 190,000 140,000 Land Buildings Accumulated depreciation Equipment Accumulated depreciation Patent Goodwill (50,000) 60,000 Total assets.. 630,000 al liabilities and equity..$630,000