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Homework answers / question archive / Power Corporation acquired 70 percent of Silk Corporation’s common stock on December 31, 2012

Power Corporation acquired 70 percent of Silk Corporation’s common stock on December 31, 2012

Accounting

Power Corporation acquired 70 percent of Silk Corporation’s common stock on December 31, 2012. Balance sheet data for the two companies immediately following the acquisition follow:

 

 

Power

 

Silk

  Item

Corporation

 

Corporation

  Assets

 

 

 

 

 

  Cash

$

44,000  

 

$

30,000  

  Accounts Receivable

 

110,000  

 

 

45,000  

  Inventory

 

130,000  

 

 

70,000  

  Land

 

80,000  

 

 

25,000  

  Buildings and Equipment

 

500,000  

 

 

400,000  

  Less: Accumulated Depreciation

 

(223,000) 

 

 

(165,000) 

  Investment in Silk Corporation Stock

 

150,500  

 

 

 

 



 



  Total Assets

$

791,500  

 

$

405,000  

 





 





  Liabilities and Stockholders’ Equity

 

 

 

 

 

  Accounts Payable

$

61,500  

 

$

28,000  

  Taxes Payable

 

95,000  

 

 

37,000  

  Bonds Payable

 

280,000  

 

 

200,000  

  Common Stock

 

150,000  

 

 

50,000  

  Retained Earnings

 

205,000  

 

 

90,000  

 



 



  Total Liabilities and Stockholders’ Equity

$

791,500  

 

$

405,000  

 





 






 

At the date of the business combination, the book values of Silk’s net assets and liabilities approximated fair value except for inventory, which had a fair value of $85,000, and land, which had a fair value of $45,000. The fair value of the noncontrolling interest was $64,500 on December 31, 2012.

 

1.

What amount of inventory will be reported?

2.

What amount of goodwill will be reported?

3.

What amount of total assets will be reported?

4.

What amount of total liabilities will be reported?

5.

What amount will be reported as noncontrolling interest?

6.

What amount of consolidated retained earnings will be reported?

7.

What amount of total stockholders’ equity will be reported?

 

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