Question;On January 1, 2011, Purple Company acquired Salmon Company. Purple paid $300,000 for 80% of Salmon's common stock. On the date of acquisition, Salmon had the following balance sheet:Assets Liabilities and EquityAccounts receivable $50,000 Accounts payable $60,000Inventory 60,000 Bonds payable 200,000Land 100,000 Common stock($1par) 10,000Buildings 150,000 Paid-in capital in excess of par 90,000Accumulated depreciation (50,000) Retained earnings 60,000Equipment 100,000Accumulated depreciation (30,000)Goodwill 40,000total assets $420,000 Total liabilities and equity $420,00080% equity, several excess distribution, inventory, fixed assets, parent and subsidiary sales.Refer to the proceeding facts for Purple's acquisition of Salmon common stock. On January 1, 2012 Salmon held merchandise sold to it by Purple for $14,000. This beginning inventory had applicable gross profit of 40%. During 2012, Purple sold merchandise to Salmon for $60,000. On December 31, 2012, Salmon held $12,000 of this merchandise in its inventory. This ending inventory had an applicable gross profit of 35%. Salmon owed Purple $8,000 on December 31 as a result of this intercompany sale.Purple held $12,000 worth of merchandise in its beginning inventory from sales from Salmon. This beginning inventory had an applicable gross profit of 25%. During 2012 Salmon sold merchandise to Purple for $30,000. Purple held $16,000 of its inventory at the end of the year. this ending inventory had an applicable gross profit of 30%. Purple owed Salmon $6,000 on December 31as a result of this intercompany sale.On January 1, 2011, Purple sold equipment to Salmon at a profit of $40,000. Depreciation on this equipment is computed over an 8-year life using the straight-line method.On January 1, 2012, Salmon sold equipment with a book value of $30,000 to Purple for $54,000. This equipment has a 6-year life and is depreciated using the straight-line method.Purple and Salmon had the following trial balances on December 31, 2012:Purple Salmoncash 92,400 57,500accounts receivable 130,000 36,000inventory 105,000 76,000land 100,000 100,000investment in Salmon company 381,200buildings 800,000 150,000accumulated depreciation (250,000) (60,000)equipment 210,000 220,000accumulated depreciation (115,000) (80,000)goodwill 40,000accounts payable (70,000) (78,000)bonds payable (200,000)common stock (100,000) (10,000)paid-in capital in excess of par (800,000) (90,000)retained earnings, January 1, 2012 (325,000) (142,000)sales (800,000) (350,000)cost of goods sold 450,000 208,500depreciation expense-buildings 30,000 5,000depreciation expense-equipment 25,000 23,000other expenses 140,000 92,000interest expense 16,000gain on sale of fixed asset (24,000)subsidiary income (23,600)dividends declared 20,000 10,000totals 0 01. Prepare a value analysis and determination and distribution of excess schedule for the investment in Salmon.
Paper#50430 | Written in 18-Jul-2015Price : $19