Question

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	$	408,250		82,650		$	82,650
Receivables		225,750		330,000			330,000
Inventory		632,500		219,000			275,300
Land		792,500		173,000			149,100
Building and equipment (net)		627,500		334,000			399,800
Franchise agreements		225,000		255,000			285,000
Accounts payable		(303,000	)	(161,000	)		(161,000	)
Accrued expenses		(141,000	)	(49,750	)		(49,750	)
Longterm liabilities		(1,130,000	)	(550,000	)		(550,000	)
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		(560,000	)	(306,000	)
Revenues		(1,023,500	)	(381,900	)
Expenses		976,000		355,000

Note: Parentheses indicate a credit balance.

On December 31, Padre acquires Sol’s outstanding stock by paying $367,000 in cash and issuing 12,300 shares of its own common stock with a fair value of $40 per share. Padre paid legal and accounting fees of $28,100 as well as $9,400 in stock issuance costs.

Determine the value that would be shown in Padre’s consolidated financial statements for each of the accounts listed

Answer 1

Consolidated Balances
	Amount in $	Working
Cash	86,400	(408,250 + 82,650 - 367,000 -28,100 -9,400 )
Receivables	555,750	(225,750 + 330,000 )
Inventory	907,800	( 632,500 + 275,300 )
Land	941,600	(792,500 + 149,100 )
Building and equipment (net)	1,027,300	(627,500 + 399,800 )
Goodwill	97,900	Below
Franchise agreements	510,000	(225,000 + 285,000 )
Accounts payable	(464,000)	(303,000 + 161,000 )
Accrued expenses	(190,750)	(141,000 + 49,750 )
Longterm liabilities	(1,680,000)	( 1,130,000 + 550,000 )
Common stock—$20 par value	(906,000)	(660,000 + ( 12,300 x 20 ) )
Additional paid–in capital	(306,600)	(70,000 + ( 12,300 x 20 ) - 9,400 )
Retained earnings, 1/1	(560,000)	Given of Padre Company
Revenues	(1,023,500)	Given of Padre Company
Expenses	1,004,100	(976,000 + 28,100 )
Working for Goodwill	Amount in $
Purchase Consideration	859,000	( 367,000 + (12,300 x 40 ) )
Less: Book Value of Sol Company	(632,900)	(210,000 + 90,000 +306,000 + 381,900 - 355,000 )
Less: Fair in excess of Book value of assets:
Inventory	(56,300)
Building and equipment (net)	(65,800)
Franchise agreements	(30,000)
Add:Book value in excess of Fair value of assets
Land	23,900
Goodwill	97,900