Consolidated Balance Sheet: Cost Exceeding Book Value
The balance sheets of Cheever and Ham Companies as of December 31, 20xx, are as follows.
Assume that Cheever Company purchased 100 percent of Ham’s common stock for $1,400,000 immediately prior to December 31, 20xx. Also assume that $100,000 of the excess of cost over book value is attributable to the increased value of Ham Company’s property, plant, and equipment. Cheever considers the rest of the excess to be goodwill.
Required
1. Prepare a work sheet for preparing a consolidated balance sheet as of the acquisition date.
2. User Insight: If you were reading Cheever’s consolidated balance sheet, what account would indicate that Cheever paid more than book value for Ham and where would you find it on the balance sheet? Also, would you expect the amount of this account to change from year-to-year? What would cause it to change?
