On January 1, 2018, Peach Company issued 1,500 of its $20 par value common shares with a fair value of

$60 per share in exchange for the 2,000 outstanding common shares of Swartz Company in a purchase
transaction. Registration costs amounted to $1,700, paid in cash. Just prior to the acquisition, the
balance sheets of the two companies were as follows:
Peach Company Swartz Company
Cash $ 73,000 $ 13,000
Account receivable (net) 95,000 19,000
Inventory 58,000 25,000
Plant and equipment (net) 95,000 43,000
Land 26,000 22,000
Total assets $ 347,000 $ 122,000

Account payable $ 66,000 $ 18,000

Notes payable 82,000 21,000
Common stock, $20 par value 100,000 40,000
Other contributed capital 60,000 24,000
Retained earnings 39,000 19,000
Total equities $ 347,000 $ 122,000

Any difference between the book value of equity and the value implied by the purchase price relates to
goodwill.

A. Prepare the journal entry on Peach Company's books to record the exchange of stock.
Investment in S Company 90,000 1,500 x 60
Common Stock 30,000 1,500 x 20
Other Contributed Capital 60,000 1,500 x 40

Other Contributed Capital 1,700

Cash 1,700

B. Prepare a Computation and Allocation Schedule for the difference between book value and value
implied by the purchase price.
P Share Non Controlling Total Value
Purchase price & implied value 90,000 0 90,000
Less: BV of subsidiary equity
Common Stock 40,000 0 40,000
Other Contributed Capital 24,000 0 24,000
Retained Earning 19,000 0 19,000
Difference between IV&BV 7,000 0 7,000

Journal:
Common Stock 40,000
Other Contributed Capital 24,000
Retained Earnings 19,000
Difference between IV & BV 7,000
 Investment in S 90,000

Goodwill 7,000
Dfference between IV & BV 7,000

C. Prepare a consolidated balance sheet at the date of acquisition.

Consolidated Balance Sheet Workpaper
Peach Company & Subsidiary
January 1 2018
Asset: P Comp S Comp Debit Credit NCI Consolidated
Cash 71,300 13,000 84,300
A/R 95,000 19,000 114,000
Inventory 58,000 25,000 83,000
PPE 95,000 43,000 138,000
Land 26,000 22,000 48,000
Goodwill 7,000 7,000
Difference 7,000 7,000 0
Investment 90,000 90,000 0
Total Asset 435,300 122,000 14,000 97,000 474,300
Liabilities:
A/P 66,000 18,000 84,000
Notes Payable 82,000 21,000 103,000
Common Stock
P Comp 130,000 130,000
S Comp 40,000 40,000 0
OCC
P Comp 118,300 118,300
S Comp 24,000 24,000 0
R/E
P Comp 39,000 39,000
S Comp 19,000 19,000 0
Total Liab & Equity 435,300 122,000 83,000 474,300