Question

Pratt Company acquired all of the outstanding shares of Spider, Inc., on December 31, 2021, for $490,350 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	$	45,500		$	86,700
Equipment		74,500			60,000
Client contracts		0			121,000
In-process research and development		0			30,750
Notes payable		(95,400	)		(104,000	)

At December 31, 2021, the following financial information is available for consolidation (credit balances in parentheses):

	Pratt				Spider
Cash	$	14,050			$	14,400
Receivables		108,500				64,500
Inventory		176,000				73,800
Investment in Spider		490,350				0
Computer software		244,000				45,500
Buildings (net)		617,500				153,000
Equipment (net)		379,000				74,500
Client contracts		0				0
Goodwill		0				0
Total assets	$	2,029,400			$	425,700
Accounts payable	$	(95,900	)		$	(54,800	)
Notes payable		(530,500	)			(95,400	)
Common stock		(380,000	)			(100,000	)
Additional paid-in capital		(170,000	)			(25,000	)
Retained earnings		(853,000	)			(150,500	)
Total liabilities and equities	$	(2,029,400	)		$	(425,700	)

Prepare a consolidated balance sheet for Pratt and Spider as of December 31, 2021.

Answer 1

Balance sheet as on December 31,2021

Particular	Praft	Spider	Debit	Credit	Consolidated
Cash	14,050	14,400	-	-	28,450
Receibles	108,500	64,500	-	-	173,000
Inventory	176,000	73800	-	-	249,800
Investment	490,350	-	-	490,350	490,350
Computer software	45,500	86,700	41,200	-	173,400
Bulding	617,500	153,000	-	-	770,500
Equipment	379,000	74,500	-	14,500	453,500
Client Contract	-	-	121,000	-	121,000
Im-process	-	-	30,750	-	30,750
Goodwill	-	-	22,300	-	22,300
Total Assets	1,830,900	466,900	215,250	504,850	2,513,050
Accounts Payable	(95,900)	(54,800)	-	-	(150,700)
Notes Payable	(530,500)	(95,400)	(8,600)	-	(634,500)
Common Stock	(380,000)	(100,000)	-	(100,000)	(380,000)
paid in Capital	(170,000)	(25,000)	-	(25,000)	(170,000)
Retained Earing	(853,000)	(150,500)	-	(150,500)	(853,000)
Total Liabilities	(2,029,400)	(395,700)	(8,600)	(275,500)	(2,188,200)

Working Note:

Calculation for goodwill:

Particular	Amount
Investment Value	490,350
Less:Cash	(14,400)
Receivables	(64,500)
Inventory	(73,800)
Computer Softwear	(86,700)
Building	(153,000)
Equipments	(74,500)
Cllient Contract	(121,000)
In-Process	(30,750)
Account Payable	(54,800)
Notes payable	(95,400)
Goodwill	22,300