Question

Pratt Company acquired all of Spider, Inc.’s outstanding shares on December 31, 2018, for $507,950 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	$	29,000			$	78,600
Equipment		55,800				40,700
Client contracts		0				114,000
In-process research and development		0				30,500
Notes payable		(72,900	)			(81,950	)

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

	Pratt				Spider
Cash	$	8,950			$	18,400
Receivables		103,500				87,000
Inventory		152,500				86,000
Investment in Spider		507,950				0
Computer software		227,000				29,000
Buildings (net)		604,750				130,500
Equipment (net)		358,000				55,800
Client contracts		0				0
Goodwill		0				0
Total assets	$	1,962,650			$	406,700
Accounts payable	$	(90,400	)		$	(44,000	)
Notes payable		(514,250	)			(72,900	)
Common stock		(380,000	)			(100,000	)
Additional paid-in capital		(170,000	)			(25,000	)
Retained earnings		(808,000	)			(164,800	)
Total liabilities and equities	$	(1,962,650	)		$	(406,700	)

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

Answer 1