Problem 2-23 [LO4, LO5, LO7]On January 1, 2013, Marshall Company acquired 100 percent of the outstanding common stock of Tucker Company. To acquire these shares, Marshall issued $190,950 in long-term liabilities and 21,600 shares of common stock having a par value of $1 per share but a fair value of $10 per share. Marshall paid $31,200 to accountants, lawyers, and brokers for assistance in the acquisition and another $23,100 in connection with stock issuance costs. Prior to these transactions, the balance sheets for the two companies were as follows: Marshall CompanyBook ValueTucker CompanyBook Value Cash$88,000 $14,400 Receivables300,000 93,600 Inventory327,000 111,000 Land208,000 251,000 Buildings (net)430,000 297,000 Equipment (net)237,000 58,750 Accounts payable(186,000) (58,750) Long-term liabilities(510,000) (281,000) Common stock—$1 par value(110,000) Common stock—$20 par value(120,000) Additional paid-in capital(360,000) 0 Retained earnings, 1/1/13(424,000) (366,000) ________________________________________ Note: Parentheses indicate a credit balance. In Marshall’s appraisal of Tucker, it deemed three accounts to be undervalued on the subsidiary’s books: Inventory by $5,800, Land by $25,050, and Buildings by $39,600. Marshall plans to maintain Tucker’s separate legal identity and to operate Tucker as a wholly owned subsidiary. a.Determine the amounts that Marshall Company would report in its postacquisition balance sheet. In preparing the postacquisition balance sheet, any required adjustments to income accounts from the acquisition should be closed to Marshall’s retained earnings. (Input all amounts as positive values.)b.Prepare a worksheet to consolidate the balance sheets of these two companies as of January 1, 2013. (Leave no cells blank – be certain to enter “0” wherever required. Enter the consolidation entries of ‘Investment in Tucker Company’ in order of (S) Elimination of subsidiary’s stockholders’ equity and (A) Allocation of Tucker’s consideration fair value in excess of book value. Input all amounts as positive values except for the credit balances which should be entered with the minus sign.) Problem 2-24 [LO4, LO5, LO7, LO8]Pratt Company acquired all of Spider, Inc.’s outstanding shares on December 31, 2013, for $478,050 cash. Pratt will operate Spider as a wholly owned subsidiary with a separate legal and accounting identity. Although many of Spider’s book values approximate fair values, several of its accounts have fair values that differ from book values. In addition, Spider has internally developed assets that remain unrecorded on its books. In deriving the acquisition price, Pratt assessed Spider’s fair and book value differences as follows: BookValuesFairValues Computer software$49,500 $88,500 Equipment55,500 36,400 Client contracts0 105,000 In-process research and development0 29,750 Notes payable(104,000) (112,850) ________________________________________ At December 31, 2013, the following financial information is available for consolidation: PrattSpider Cash$15,500 $19,200 Receivables117,000 57,900 Inventory165,000 103,900 Investment in Spider478,050 0 Computer software250,000 49,500 Buildings (net)600,500 172,500 Equipment (net)319,000 55,500 Client contracts0 0 Goodwill0 0 ________________________________________________________________________________________________________________________________________________________________________________________________________ Total assets$1,945,050 $458,500 ________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________ Accounts payable$(96,300) $(65,500) Notes payable(530,750) (104,000) Common stock(380,000) (100,000) Additional paid-in capital(170,000) (25,000) Retained earnings(768,000) (164,000) ________________________________________________________________________________________________________________________________________________________________________________________________________ Total liabilities and equities$(1,945,050) $(458,500) ________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________Note: Parentheses indicate a credit balance. Prepare a consolidated balance sheet for Pratt and Spider as of December 31, 2013. (Input all amounts as positive values.)
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