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Book Value of Equity and the Value Implied by Purchase Price

Consolidated Balance Sheet Problem

On January 1, 2012, Perry Company purchased 8,000 shares of Soho Company's common stock for $120,000. See below for statement of financial position for both Perry and Soho shortly after acquisition:

Please see attachment for associated table.

A. Calculate the percentage of Soho acquired by Perry Company.
B. Prepare a schedule to compute the difference between implied and book value of equity acquired (CAD schedule).
C. Prepare a consolidated balance sheet work paper as of January 1, 2012.
D. Suppose instead that Perry acquired 8,000 shares for $20 per share including a $5 per share control premium. Prepare a computation and allocation of difference schedule.


Solution Summary

For your review, I have attached a formatted MS Excel spreadsheet that contains detailed instructions for the creation of a difference between book value of equity and the value implied by the purchase price.