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On January 2, 2016, Revolution Co. issued 150,000 new shares of its $1 par value common...

On January 2, 2016, Revolution Co. issued 150,000 new shares of its $1 par value common stock valued at $16 a share for all of Founders, Inc.’s outstanding common shares. The fair value and book value of Founders’ identifiable assets and liabilities were the same. Summarized balance sheet information for both companies just before the acquisition on January 2, 2016, is as follows:

Revolution Founders
Cash $ 250,000 $ 180,000
Inventories $         320,000.00 $         600,000.00
Other Current Assets $         600,000.00 $         400,000.00
Land $         350,000.00 $         500,000.00
Property, Plant & Equipment $     5,100,000.00 $      2,000,000.00
Total Assets $6,620,000   $3,680,000
Accounts Payable $ 800,000 $         350,000.00
Notes Payable $     1,800,000.00 $      1,150,000.00
Common Stock, $1 par $     2,000,000.00 $      1,000,000.00
Additional Paid-in Capital $     1,000,000.00 $         350,000.00
Retained Earnings $     1,020,000.00 $         830,000.00
Total Liabilities & Equities $     6,620,000.00 $      3,680,000.00

Required: Prepare a consolidated balance sheet for Revolution Co. immediately after the business combination.

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Expert Solution

Beforer acquisition Adjustments Consolidated amount
Revolution Founders Debit Credit Consolidated amount
Cash    2,50,000    1,80,000                   -                        -                          4,30,000
Inventories    3,20,000    6,00,000                   -                        -                          9,20,000
Other Current Assets    6,00,000    4,00,000                   -                        -                        10,00,000
Land    3,50,000    5,00,000                   -                        -                          8,50,000
Property, Plant & Equipment 51,00,000 20,00,000                   -                        -                        71,00,000
Goodwill                -                  -         2,20,000                      -                          2,20,000
   Total Assets 66,20,000 36,80,000                   -                        -                     1,05,20,000
Accounts Payable    8,00,000    3,50,000                   -                        -                        11,50,000
Notes Payable 18,00,000 11,50,000                   -                        -                        29,50,000
Common Stock, $1 par 20,00,000 10,00,000     10,00,000          1,50,000                      21,50,000
Additional Paid-in Capital 10,00,000    3,50,000       3,50,000        22,50,000                      32,50,000
Retained Earnings 10,20,000    8,30,000       8,30,000                      -                        10,20,000
Total Liabilities & Equities 66,20,000 36,80,000                   -                        -                     1,05,20,000

Journal:

Account Debit Credit
Investment in founders        24,00,000
Common Stock, $1 par          1,50,000
Additional Paid-in Capital        22,50,000
Investment in founders        24,00,000
Common Stock, $1 par        10,00,000
Additional Paid-in Capital          3,50,000
Retained Earnings          8,30,000
Goodwill          2,20,000

ekkarill92 answered 1 year ago
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