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37.     Punt Corporation acquired a controlling interest in Saye Company for cash. The separate balance sheet of Punt and the consolidated balance sheet immediately after the business combination were as follows:

















& Subsidiary


Current Assets





Investment in Saye Company common stock





Plant assets (net)










Total assets










Liabilities & Stockholders' Equity


Current liabilities


$ 35,000

$ 48,000


Common stock $5 par





Minority interest in net assets of subsidiary





Retained earnings






Total liabilities & stockholders' equity




     Plant assets of Saye Company were undervalued by $15,000 on the date of the business combination; the remainder of Punt's cost was assigned to goodwill. The retained earnings of Saye on the date of the business combination amounted to $37,000.
          a.      Prepare the separate balance sheet of Saye Company on the date of the business combination.
          b.      What percentage of the common stock of Saye was acquired by Punt?
          c.      Prepare the working paper elimination (in journal entry format) for Punt Corporation and subsidiary on the date of the business combination.

38.     On December 31, 2006, the balance sheet of Sint Company included stockholders' equity of $2,000,000. On that date, Plane Corporation acquired for cash a controlling interest in the common stock of Sint. The December 31, 2006, current fair values of Sint's identifiable net assets totaled $2,400,000, and goodwill computed as the difference between Plane's cost and its share of the current fair value of Sint's identifiable net assets was $180,000.

          Prepare a working paper to compute the total cost of Plane's investment in Sint if Plane owns:
          a. 100% of Sint's common stock
          b. 90% of Sint's common stock
          c. 80% of Sint's common stock

39.     On April 30, 2006, Press Corporation paid $168,000 cash for 80% of the outstanding common stock of Sow Company. Legal, accounting, and finder's fees paid by Press relative to the business combination totaled $24,000. The current fair value of Sow's identifiable net assets was $220,000 on April 30, 2006; the carrying amount was $200,000.
          Prepare a working paper to compute the minority interest and goodwill in the April 30, 2006 consolidated balance sheet of Press Corporation and subsidiary under each of the following independent assumptions:
          a.      Sow's identifiable net assets are recognized at current fair value; minority interest is based on current fair value of identifiable net assets.
          b.      Sow's identifiable net assets are recognized at current fair value only to the extent of Press Corporation's interest; balance of net assets and minority interest are reflected at carrying amounts in Sow's accounting records.
          c.      Current fair value, through inference, is assigned to total net assets of Sow, including goodwill.


     40.     In a proposed Statement, "Consolidated Financial Statements: Purpose and Policy," the FASB would replace objectively determined legal form by subjectively determined economic substance as a basis for consolidated financial statements. Majority ownership of an investee's outstanding common stock would no longer be a prerequisite for consolidation.
          a. Present arguments in support of the FASB's proposal.
          b. Present arguments in opposition to the FASB's proposal.

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