Pulman Company Acquired 90% of the Stock of Spectrum Company

question 22

Essay

Pulman Company acquired 90% of the stock of Spectrum Company for $6,300,000 on January 1, 2013.On this date, the fair value of the assets and liabilities of Spectrum Company was equal to their book value except for the inventory and equipment accounts.The inventory had a fair value of $2,300,000 and a book value of $1,900,000.The equipment had a fair value of $3,300,000 and a book value of $2,800,000.
The balances in Spectrum Company's capital stock and retained earnings accounts on the date of acquisition were $3,700,000 and $1,900,000, respectively.
Required:
In general journal form, prepare the entries on Spectrum Company's books to record the effect of the pushed down values implied by the acquisition of its stock by Pulman Company assuming that:
A values are allocated on the basis of the fair value of Spectrum Company as a whole imputed from the transaction.
B values are allocated on the basis of the proportional interest acquired by Pulman Company.

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Definitions:

Experience-expectant

A term related to brain development, referring to the process by which the brain evolves in response to general environmental stimuli that are expected to occur in all typical environments.

Sensory Deprivation

A condition in which one or more of the senses is diminished or eliminated, often for therapeutic or experimental purposes.

Experience-dependent

Pertaining to changes in the brain that result from learning and experience, reflecting the brain's plasticity in adapting to the environment.

Neural Development

The process by which the nervous system forms during prenatal growth and continues to evolve through childhood and adolescence.