Question

On January 1, 2019 Roberts Corporation acquired 100% of the outstanding voting stock of Williams Company in exchange for $726,000 cash. At that time, although Williams book value was $560,000, Roberts assessed Williams total business fair value as $726,000.

The book values of Williams individual assets and liabilities approximated their acquisition-date fair values except for the equipment account which was undervalued by $100,000. The undervalued equipment had a 5-year remaining life at the acquisition date. Any remaining excess fair value was attributed to goodwill.

Post-acquisition financial information for both companies on January 1, 2019 is shown below:

   Roberts    Williams

Cash 177,000 90,000

Accounts Receivable    356,000 120,000

Inventory 440,000 220,000

Investment in Williams Stock    726,000    0

Land    180,000 200,000   

Buildings and Equipment (net)    496,000 320,000

Total Assets:    $2,375,000    $950,000

Accounts Payable (120,000) (70,000)

Notes Payable (360,000) (320,000)

Common Stock    (610,000) (150,000)

Additional Paid-in Capital    (200,000) (90,000)

Retained Earnings, 1/1/19    (1,085,000) (320,000)

Total Liabilities and Stockholder's Equity    $2,375,000    $950,000

-Using the acquisition method, determine the allocation of the purchase price to the specific asset and liability accounts as of the date of the acquisition. (Round all calculations to the nearest whole dollar)

-Assuming that Roberts accounts for its investment in Williams using the equity method, prepare the worksheet entries needed on the date of acquisition.

-Finally, prepare a worksheet to consolidate the balance sheets of these two companies as of January 1, 2019.

Answer 1