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		$	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.

	Accounts Amounts Inventory $774,200 Land $851,900 Buildings and equipment $1,149,800 Franchise agreements $475,300 Goodwill Revenues Additional paid-in capital Expenses $992,000 Retained earnings, 1/1 $580,000 Retained earnings, 12/31

Answer 1

	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
								ekkarill92 Next > < Previous Related Solutions 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 $ 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. 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