Water purchased 9,000 of Sand’s 30,000 shares on 4/1/20X0 for $34,000. At 1/1/20X0, Sand had Common Stock of $30,000 and Retained Earnings of $55,000. During the 12 months ended 12/31/20X0, Sand earned income of $100,000. Annual dividends of $1 per share were authorized by the Board of Directors to be paid in equal amounts at the end of each quarter. The book values and fair values of Sand’s assets and liabilities on 4/1/20X0 were as follows: (note partial year acquisition)
Assets:
Sand Book Values
Sand Fair Values
Cash
$20,000
$20,000
Receivables
30,000
30,000
Inventory (sold in June 20X0)
22,500
40,000
Land
50,000
40,000
Building (10 year Life)
70,000
60,000
Equipment (8 year Life)
40,000
40,000
Patents (5 year life)
0
60,000
Total Assets
$232,500
$290,000
Liabilities:
Accounts Payable
$80,000
$80,000
Notes Payable (Matures on 4/1/20X3)
50,000
70,000
Requirements:
Calculate the Difference (Excess)
Calculate the goodwill/(bargain purchase gain)
Prepare the purchase price allocation and amortization schedule