Question

The separate condensed balance sheets of Patrick Corporation and its wholly owned subsidiary, Sean Corporation, are as follows:

BALANCE SHEETS
December 31, 2017
	Patrick				Sean
Cash	$	80,000			$	56,000
Accounts receivable (net)		140,000				40,000
Inventories		88,000				50,000
Plant and equipment (net)		624,000				260,000
Investment in Sean		474,000				-
Total assets	$	1,406,000			$	406,000
Accounts payable		178,000				98,000
Long-term debt		100,000				34,000
Common stock ($10 par)		338,000				80,000
Additional paid-in capital						8,000
Retained earnings		790,000				186,000
Total liabilities and shareholders' equity	$	1,406,000			$	406,000

Additional Information:

• On December 31, 2017, Patrick acquired 100 percent of Sean’s voting stock in exchange for $474,000.
• At the acquisition date, the fair values of Sean’s assets and liabilities equaled their carrying amounts, respectively, except that the fair value of certain items in Sean’s inventory were $22,000 more than their carrying amounts. 1)In the December 31, 2017, consolidated balance sheet of Patrick and its subsidiary, what amount of total assets should be reported? 2)In the December 31, 2017, consolidated balance sheet of Patrick and its subsidiary, what amount of total stockholders’ equity should be reported?

Answer 1

1.)			Amount $
	Purchase consideration		474,000
	Less: Net assets acquired		296,000
	Book Value (80,000 + 8,000 + 186,000 )	274,000
	Fair value in excess of book value of Inventory	22,000
	Goodwill		178,000
		Amount $
	Cash (80,000 + 56,000 )	136,000
	Accounts Receivable ( 140,000 + 40,000 )	180,000
	Plant & equipment ( 624,000 + 260,000 )	884,000
	Inventory ( 88,000 + 50,000 + 22,000 )	160,000
	Goodwill	178,000
	Total Assets	1,538,000
2.)		Amount $
	Common Stock	338,000
	Retained earnings	790,000
	Total stockholders’ equity	1,128,000