Question

On January 1, 2015, Casey Corporation exchanged $3,218,000 cash for 100 percent of the outstanding voting stock of Kennedy Corporation. Casey plans to maintain Kennedy as a wholly owned subsidiary with separate legal status and accounting information systems.

At the acquisition date, Casey prepared the following fair-value allocation schedule:

   

Fair value of Kennedy (consideration transferred)				$	3,218,000
Carrying amount acquired					2,600,000
Excess fair value				$	618,000
to buildings (undervalued)	$	326,000
to licensing agreements (overvalued)		(171,000)			155,000
to goodwill (indefinite life)				$	463,000

Immediately after closing the transaction, Casey and Kennedy prepared the following postacquisition balance sheets from their separate financial records.

Accounts	Casey				Kennedy
Cash	$	471,000			$	188,250
Accounts receivable		1,550,000				301,000
Inventory		1,330,000				731,750
Investment in Kennedy		3,218,000				0
Buildings (net)		6,172,500				1,860,000
Licensing agreements		0				3,250,000
Goodwill		379,500				0
Total assets	$	13,121,000			$	6,331,000
Accounts payable		(331,000	)			(461,000	)
Long-term debt		(3,790,000	)			(3,270,000	)
Common stock		(3,000,000	)			(1,000,000	)
Additional paid-in capital		0				(500,000	)
Retained earnings		(6,000,000	)			(1,100,000	)
Total liabilities and equities	$	(13,121,000	)		$	(6,331,000	)

Prepare a January 1, 2015, consolidated balance sheet for Casey Corporation and its subsidiary Kennedy Corporation.

	CASEY COMPANY AND CONSOLIDATED SUBSIDIARY KENNEDY Consolidated Balance Sheet January 1, 2015 Assets Liabilities and Owners' Equity Cash Accounts payable Accounts receivable Long-term debt Inventory Common stock Buildings (net) Additional paid-in capital Licensing agreements Retained earnings Goodwill Total assets Total liabilities and equities

Answer 1