Prepare a value analysis and a determination and distribution of excess schedule for the investment in Sardine Company.

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On January 1, 20X1, Peter Company acquires an 80% interest in Sardine Company by issuing 10,000 shares of its common stock with a par value of $10 per share and a fair value of $72 per share. At the time of the purchase, Sardine has the following balance sheet: Assets Liabilities and Equity____________ Current assets $100,000 Current liabilities $ 80,000 Investments 150,000 Bonds payable 250,000 Land 120,000 Common stock ($10 Par) 100,000 Building (net) 350,000 Paid-in-Capital 200,000 Equipment 160,000 Retained earnings 250,000 Total assets $880,000 Total liab. & equity $880,000

Appraisals indicate that book values are representative of fair values with the exception of land and buildings. The land has a fair value of $190,000, and the building is appraised at $450,000. The building has an estimated remaining life of 20 years. Any remaining excess is goodwill.

The following summary of Sardine’s retained earnings applies to 20X1 and 20X2:

Balance, January 1, 20X1 $250,000 Net income for 20X1 60,000 Dividends paid in 20X1 (10,000) Balance, Dec. 31, 20X1 $300,000 Net income for 20X2 45,000 Dividends paid in 20X2 (10,000) Balance, December 32, 20X2 $335,000

Required:

1. Prepare a value analysis and a determination and distribution of excess schedule for the investment in Sardine Company. As a part of the schedule, indicate annual amortization of excess adjustments.

2. For 20X1 and 20X2, prepare the entries that Peter would make concerning its investment in Sardine under the simple equity, sophisticated equity and cost methods.

(1) Company Parent NCI Implied Price Value Value Analysis Schedule Fair Value (80%) (20%)

Company fair value $900,000 $720,000 $180,000 Fair value of net assets excluding goodwill 720,000* 576,000 144,000 Goodwill $180,000 $144,000 $ 36,000

• $550,000 equity + $170,000 asset adjustments

Based on the above information, the following D&D schedule is prepared:

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