Exercise 510 On January 2 2013 Page Corporation acquired a 9

Exercise 5-10 On January 2 2013 Page Corporation acquired a 90% interest in Salceda Company for $3,500,000. At that time Salcedo Company had common stock of S2 250 000 and retained earnings of $1,250,000. The book values of Salcedo Company\'s assets and liabilities were equal to their fair values except for land and bonds payable. The land had a fair value of $200.000 and a book value of $120 000 The outstanding bonds were issued on January 1, 2008, at 9% and mature on January 1 2018. The bonds\' pria al is SSD?O and the current yield rate on similar bonds is 6%. Your answer is partially correct. Try again. Assuming interest is paid annually, prepare a Computation and Allocation Schedule for the difference between book value and the value implied by the purchase price in the consoldated statements wor paper on the acquisition date. (Round present value factor calculations to S decinal places, eg 1.25136 and final answers to O decimal places, e.g. 5,125) Parent Controlling Entire Purchase Price and essBook Value of Equity Acquired ed and Book value Premium on Bonds Payable Land Balance

Solution

Parent company Non-controlling interest Entire Value Purchase price and inplied value 3500000 388889 3888889 Less: book value of equity acquired 3150000 350000 3500000 Difference between inmplied and book value 350000 38889 388889 Premium on bonds payable   * 56865 6318 63183 Land 72000 8000 80000 Balance 128865 14318 143183 Goodwill (Balancing amount) 221135 24571 245706 Balance 350000 38889 388889 Face value of the bonds 500000 Stated interest rate 9% Annual interest 45000 Market rate 6% PV of $1 received after 5 years @6% 0.747258 PV of annuity of $1 for 5 periods @6% 4.2123 Present value of the face value 373629 Present value of the interest payments 189554 Market value of the bond 563183 Premium on bonds * 63183