In: Accounting
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 | $ | 491,250 | $ | 56,950 | $ | 56,950 | |||||||||
Receivables | 238,500 | 379,000 | 379,000 | ||||||||||||
Inventory | 472,500 | 243,000 | 301,700 | ||||||||||||
Land | 680,000 | 201,000 | 171,900 | ||||||||||||
Building and equipment (net) | 777,500 | 312,000 | 372,300 | ||||||||||||
Franchise agreements | 235,000 | 210,000 | 240,300 | ||||||||||||
Accounts payable | (387,000 | ) | (120,000 | ) | (120,000 | ) | |||||||||
Accrued expenses | (121,000 | ) | (36,250 | ) | (36,250 | ) | |||||||||
Long-term liabilities | (1,032,500 | ) | (677,500 | ) | (677,500 | ) | |||||||||
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 | (580,000 | ) | (243,000 | ) | |||||||||||
Revenues | (1,016,250 | ) | (434,200 | ) | |||||||||||
Expenses | 972,000 | 409,000 | |||||||||||||
Note: Parentheses indicate a credit balance.
On December 31, Padre acquires Sol’s outstanding stock by paying $329,000 in cash and issuing 11,000 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 $8,400 in stock issuance costs. |
Determine the value that would be shown in Padre’s consolidated financial statements for each of the accounts listed. |
|
The Value that would be shown in Padre Consolidated | |||||||||||
Financial Statements for each of the accounts listed | |||||||||||
Padre Company | Sol Company | Consolidated | |||||||||
Book Value | Fair Value | Financial Statements | |||||||||
Inventory | 472,500 | + | 301,700 | = | 774,200 | ||||||
Land | 680,000 | + | 171,900 | = | 851,900 | ||||||
Buildings and Equipment | 777,500 | + | 372,300 | = | 1,149,800 | ||||||
Franchise Agreements | 235,000 | + | 240,300 | = | 475,300 | ||||||
Goodwill | + | = | 46,400 | ||||||||
Revenues | + | = | 1,016,250 | ||||||||
Additional Paid in Capital | + | = | 281,600 | ||||||||
Expenses | + | = | 992,000 | ||||||||
Retained Earnings 1/1 | + | = | 580,000 | ||||||||
Retained Earnings 12/31 | + | = | 604,250 | ||||||||
I | Working Note:Calculation of Value of Goodwill | ||||||||||
Value of Goodwill | Purchase Price-Fair value of sole company net asset | ||||||||||
Purchase Price | Cash Paid+Fair value of common stock issued | ||||||||||
Purchase Price | 329000+(11000 X 40) | 769,000 | |||||||||
Fair Value of Sol Company Net assets=Fair value of all assets-Fair value of all liabilities | |||||||||||
Fair Value of Assets | |||||||||||
Cash | 57,350 | ||||||||||
Receivables | 304,000 | ||||||||||
Inventory | 296,500 | ||||||||||
Land | 133,000 | ||||||||||
Building and equipments (net) | 476,700 | ||||||||||
Franchise Agreement | 257,800 | ||||||||||
1,525,350 | |||||||||||
Fair Value of Liabilities | |||||||||||
Accounts Payable | 195,000 | ||||||||||
Accrued Expenses | 52,750 | ||||||||||
Long Term Liabilities | 555,000 | ||||||||||
802,750 | |||||||||||
Related SolutionsFollowing are preacquisition financial balances for Padre Company and Sol Company as of December 31. Also...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
$
262,500
46,850
$
46,850
Receivables
251,250
358,000
358,000
Inventory
432,500
305,000
356,400
Land
762,500
163,000
141,500
Building and
equipment (net)
637,500
320,000
387,100
Franchise
agreements
232,000
268,000
303,000
Accounts
payable
(314,000
)
(183,000
)
(183,000
)
Accrued
expenses
(121,000
)
(33,250...
Following are preacquisition financial balances for Padre Company and Sol Company as of December 31. Also...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
$
306,750
62,450
$
62,450
Receivables
257,250
376,000
376,000
Inventory
590,000
291,000
344,200
Land
805,000
140,000
119,800
Building and equipment (net)
697,500
335,000
402,500
Franchise agreements
230,000
250,000
285,200
Accounts payable
(364,000
)
(205,000
)
(205,000
)
Accrued expenses
(156,000
)
(39,750...
Following are preacquisition financial balances for Padre Company and Sol Company as of December 31. Also...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
$
408,250
82,650
$
82,650
Receivables
225,750
330,000
330,000
Inventory
632,500
219,000
275,300
Land
792,500
173,000
149,100
Building and equipment (net)
627,500
334,000
399,800
Franchise agreements
225,000
255,000
285,000
Accounts payable
(303,000
)
(161,000
)
(161,000
)
Accrued expenses
(141,000
)
(49,750...
Following are preacquisition financial balances for Padre Company and Sol Company as of December 31. Also...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
$
262,500
46,850
$
46,850
Receivables
251,250
358,000
358,000
Inventory
432,500
305,000
356,400
Land
762,500
163,000
141,500
Building and equipment (net)
637,500
320,000
387,100
Franchise agreements
232,000
268,000
303,000
Accounts payable
(314,000
)
(183,000
)
(183,000
)
Accrued expenses
(121,000
)
(33,250...
Following are preacquisition financial balances for Padre Company and Sol Company as of December 31. Also...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)
Longterm liabilities...
Following are preacquisition financial balances for Padre Company and Sol Company as of December 31. Also...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) Longterm
liabilities...
Following are preacquisition financial balances for Padre Company and Sol Company as of December 31. Also...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
$
193,250
$
72,900
$
72,900
Receivables
228,000
369,000
369,000
Inventory
602,500
190,000
242,200
Land
765,000
195,000
166,200
Building and equipment (net)
765,000
271,000
340,000
Franchise agreements
224,000
216,000
249,900
Accounts payable
(350,000
)
(138,000
)
(138,000
)
Accrued expenses
(119,000
)...
Following are preacquisition financial balances for Padre Company and Sol Company as of December 31. Also...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)
Longterm liabilities...
Following are preacquisition financial balances for Padre Company and Sol Company as of December 31. Also...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
$
354,750
$
56,700
$
56,700
Receivables
242,250
312,000
312,000
Inventory
482,500
174,000
229,900
Land
720,000
194,000
171,200
Building and equipment (net)
837,500
332,000
395,300
Franchise agreements
242,000
252,000
290,800
Accounts payable
(352,000
)
(152,000
)
(152,000
)
Accrued expenses
(189,000
)...
Following are preacquisition financial balances for Padre Company and Sol Company as of December 31. Also...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...
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