Question

In: Accounting

Following are preacquisition financial balances for Padre Company and Sol Company as of December 31. Also...

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

Solutions

Expert Solution

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

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