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		$	400,000				$	120,000				$	120,000
Receivables			220,000					300,000					300,000
Inventory			410,000					210,000					260,000
Land			600,000					130,000					110,000
Building and equipment (net)			600,000					270,000					330,000
Franchise agreements			220,000					190,000					220,000
Accounts payable			(300,000)					(120,000)					(120,000)
Accrued expenses			(90,000)					(30,000)					(30,000)
Long-term liabilities			(900,000)					(510,000)					(510,000)
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			(390,000)					(240,000)
Revenues			(960,000)					(330,000)
Expenses			920,000					310,000

Note: Parentheses indicate a credit balance.

On December 31, Padre acquires Sol’s outstanding stock by paying $360,000 in cash and issuing 10,000 shares of its own common stock with a fair value of $40 per share. Padre paid legal and accounting fees of $20,000 as well as $5,000 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

Accounts	Amount	Working
Inventory	670,000	410,000 + 260,000
Land	710,000	600,000 + 110,000
Buildings and equipment	930,000	600,000 + 330,000
Franchise agreements	440,000	220,000 + 220,000
Goodwill	80,000	Note 1
Revenues	960,000	Given
Additional paid-in capital	275,000	Note 2
Expenses	940,000	920,000 + 20,000 (legal fee)
Retained earnings, 1/1	390,000

Notes:

1. Goodwil

Consideration paid:
Cash	360,000
FV of issued shares	400,000	760,000
FV of Net assets of Sol company
Cash	120,000
Receivables	300,000
Inventory	260,000
Land	110,000
Building and equipment (net)	330,000
Franchise agreements	220,000
Accounts payable	(120,000)
Accrued expenses	(30,000)
Long-term liabilities	(510,000)	(680,000)
Goodwill		80,000

2. APIC

Padre's APIC	70,000
APIC on the issuance of shares (10,000 *20)	200,000
Stock issuance costs	(5,000)
Consolidated APIC	265,000