In: Accounting
Following are preacquisition financial balances for Padre Company and Sol Company as of December 31. Also included are fair values for Sol Company accounts.
Padre Company |
Sol Company |
|||||||
Book Values | Book Values | Fair Values | ||||||
12/31 | 12/31 | 12/31 | ||||||
Cash | $ | 306,750 | 62,450 | $ | 62,450 | |||
Receivables | 257,250 | 376,000 | 376,000 | |||||
Inventory | 590,000 | 291,000 | 344,200 | |||||
Land | 805,000 | 140,000 | 119,800 | |||||
Building and equipment (net) | 697,500 | 335,000 | 402,500 | |||||
Franchise agreements | 230,000 | 250,000 | 285,200 | |||||
Accounts payable | (364,000 | ) | (205,000 | ) | (205,000 | ) | ||
Accrued expenses | (156,000 | ) | (39,750 | ) | (39,750 | ) | ||
Longterm liabilities | (955,000 | ) | (585,000 | ) | (585,000 | ) | ||
Common stock—$20 par value | (660,000 | ) | ||||||
Common stock—$5 par value | (210,000 | ) | ||||||
Additional paid–in capital | (70,000 | ) | (90,000 | ) | ||||
Retained earnings, 1/1 | (625,000 | ) | (297,000 | ) | ||||
Revenues | (990,500 | ) | (364,700 | ) | ||||
Expenses | 934,000 | 337,000 | ||||||
Note: Parentheses indicate a credit balance.
On December 31, Padre acquires Sol’s outstanding stock by paying $137,000 in cash and issuing 17,700 shares of its own common stock with a fair value of $40 per share. Padre paid legal and accounting fees of $25,400 as well as $9,900 in stock issuance costs.
Determine the value that would be shown in Padre’s consolidated financial statements for each of the accounts listed. (Input all amounts as positive values.)
Accounts Amounts
Inventory
Land
Buildings and equipment
Franchise agreements
Goodwill
Revenues
Additional paid-in capital
Expenses
Retained earnings, 1/1
Retained earnings, 12/31
Determine the value that would be shown in Padre and Sol's consolidated financial statements for each of the accounts listed.
.
Accounts | Amounts |
Inventory | $9,34,200 |
Land | $9,45,000 |
Buildings and equipment | $10,32,500 |
Franchise agreements | $4,80,000 |
Goodwill | $84,600 |
Revenues | $9,90,500 |
Additional paid-in capital | $4,33,900 |
Expenses | $9,59,400 |
Retained earnings, 1/1 | $6,25,000 |
Retained earnings, 12/31 | $9,80,800 |
.
working Note:-
Computations: | ||
Padre's inventory @ CA | 590000 | |
Sol's inventory @ FV | 344200 | |
Consolidated inventory | 934200 | |
P's Land @ CA | 805000 | |
S's Land @ CA | 140000 | |
Consolidated land | 945000 | |
P's Building and equipment @ CA | 697500 | |
S's Building and equipment @ CA | 335000 | |
Consolidated building and equipment | 1032500 | |
P's Franchise agreement @ CA | 230000 | |
S's Franchise agreement @ CA | 250000 | |
Consolidated franchise agreement | 480000 | |
Consolidated goodwill | ||
Consideration paid: | ||
Cash | 137000 | |
FV of issued shares = 17700 * 40 | 708000 | 845000 |
FV of Net assets of Sol's company | ||
Cash | 62450 | |
Receivables | 376000 | |
Inventory | 344200 | |
Land | 119800 | |
Building and equipment (net) | 402500 | |
Franchise agreements | 285200 | |
Accounts payable | -205000 | |
Accrued expenses | -39750 | |
Long-term liabilities | -585000 | 760400 |
Goodwill | 84600 | |
P's Revenue | 990500 | |
Only Padre's revenue are recorded in consolidated statement | ||
P's APIC | 70000 | |
APIC on the issuance of shares (17700 *20) | 354000 | |
Stock issuance costs | 9900 | |
Consolidated APIC | 433900 | |
P's Expenses | 934000 | |
Legal and accounting fees | 25400 | |
Consolidated expenses | 959400 | |
P's Retained Earnings beginning | 625000 | |
Retained earnings, 12/31 | ||
P's Retained Earnings beginning | 625000 | |
Add: Net income | 31100 | |
Add: S's Retained earnings 1/1 | 297000 | |
Add: Net income of S's | 27700 | |
Retained earnings, 12/31 | 980800 |