Question

Pratt Company acquired all of Spider, Inc.’s outstanding shares on December 31, 2018, for $484,900 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:

	Book Values				Fair Values
Computer software	$	46,600			$	94,350
Equipment		78,500				67,900
Client contracts		0				112,500
In-process research and development		0				29,000
Notes payable		(71,900	)			(78,900	)

At December 31, 2018, the following financial information is available for consolidation:

	Pratt				Spider
Cash	$	32,400			$	6,800
Receivables		120,500				32,000
Inventory		171,500				54,000
Investment in Spider		484,900				0
Computer software		230,500				46,600
Buildings (net)		595,000				171,500
Equipment (net)		315,000				78,500
Client contracts		0				0
Goodwill		0				0
Total assets	$	1,949,800			$	389,400
Accounts payable	$	(95,300	)		$	(41,000	)
Notes payable		(531,500	)			(71,900	)
Common stock		(380,000	)			(100,000	)
Additional paid-in capital		(170,000	)			(25,000	)
Retained earnings		(773,000	)			(151,500	)
Total liabilities and equities	$	(1,949,800	)		$	(389,400	)
Prepare Balance Sheet Assets Liabilities Cash    Account Payable    Receivables Notes Payable Inventory Common Stock Computer Software Additional paid-in capital Buildings (net) Retained Earnings Equipment (net) Client Contracts R&D assets Goodwill Total Assets Total Liabilites & Equities

Answer 1

Consolidated Balance Sheet as on December 31, 2018
Assets		Liabilities
Cash	$39,200	Account Payable	$136,300
Receivable	$152,500	Notes Payable	$610,400
Inventory	$225,500	Common Stock	$380,000
Computer Software	$324,850	Additional Paid in Capital	$170,000
Building (net)	$766,500	Retained Earnings	$773,000
Equipment (net)	$382,900
Client Contract	$112,500
R&D assets	$29,000
Goodwill	$36,750
Total Assets	$2,069,700	Total Liabilities and Equity	$2,069,700
Working Note:
Goodwill
Cash paid for acquisition	$484,900
Less: Book Value
Common Stock	$100,000
APIC	$25,000
Retained Earnings	$151,500
Total	$276,500
Excess paid over book value	$208,400
Excess allocated to
Computer Software	$47,750
Equipment	($10,600)
Client Contracts	$112,500
R&D assets	$29,000
Notes payable	($7,000)
Goodwill	$36,750