Question

Pratt Company acquired all of Spider, Inc.’s outstanding shares on December 31, 2018, for $513,100 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	$	65,500			$	120,750
Equipment		82,500				68,100
Client contracts		0				129,000
In-process research and development		0				30,250
Notes payable		(90,400	)			(95,400	)

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

	Pratt				Spider
Cash	$	13,700			$	21,400
Receivables		140,500				41,500
Inventory		144,500				79,500
Investment in Spider		513,100				0
Computer software		229,000				65,500
Buildings (net)		569,000				130,000
Equipment (net)		366,000				82,500
Client contracts		0				0
Goodwill		0				0
Total assets	$	1,975,800			$	420,400
Accounts payable	$	(93,300	)		$	(59,500	)
Notes payable		(525,500	)			(90,400	)
Common stock		(380,000	)			(100,000	)
Additional paid-in capital		(170,000	)			(25,000	)
Retained earnings		(807,000	)			(145,500	)
Total liabilities and equities	$	(1,975,800	)		$	(420,400	)

Prepare a consolidated balance sheet for Pratt and Spider as of December 31, 2018.

Answer 1