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In: Accounting

Thorn Corporation acquired 100 percent of the stock of Byrd Company by issuing 10,000 new shares...

Thorn Corporation acquired 100 percent of the stock of Byrd Company by issuing 10,000 new shares for exchange. The par-value per share is $10 and the market value per share is $120. Summarized balance sheet information for the two companies immediately preceding the acquisition is as follows:

Thorn Byrd
Cash and Receivables 1,200,000 420,000
Inventory 40,000 470,000
Land 120,000 100,000
Buildings and Equipment (net) 2,460,000 220,000
Bond Investments 700,000
Total Assets 4,520,000 1,210,000
Accounts and Notes Payable 820,000 220,000
Common Stock 1,040,000 440,000
Additional Paid-In Capital 1,600,000 240,000
Retained Earnings 1,060,000 310,000
Total Liabilities and Stockholders' Equities 4,520,000 1,210,000

At the time of acquisition, the book values and market values of Byrd's assets were approximately the same except its inventory was worth $500,000 and land was worth $120,000. At that date, Thorn owes Byrd $20,000 on account.

Required: Compute the balances to be reported in a consolidated balance sheet prepared immediately following the acquisition for:

  1. Cash and Receivables
  2. Inventory
  3. Land
  4. Buildings and Equipment (net)
  5. Goodwill
  6. Accounts and Notes Payable
  7. Stockholders' Equity

Solutions

Expert Solution

ANSWER:

Combination end passage

Record Head Debit Credit Remarks

Normal stock 4,40,000

Extra paid in capital 2,40,000

Held earnings 3,10,000

Investment 12,00,000

Inventory 30,000 Adjusted to advertise esteem 500000-470000)

Land 20,000 Adjusted to showcase esteem 120000-100000)

Goodwill 1,60,000 Balancing sum

Intercompany levy elimiation passage

Records and notes payable 20000

Records receivable 20000

Particulars Thorn Byrd Consolidation adjustment Total

a. Inventory 40,000 4,70,000 30,000 5,40,000

b. Land 1,20,000 1,00,000 20,000 2,40,000

c .Buildings and equipment (Net ) 24,60,000 2,20,000 0 26,80,000

d .Cash and receivable 12,00,000 4,20,000 0 16,20,000

e .Goodwill 0 0 1,60,000 1,60,000

f .Accounts and notes payable 8,20,000 2,20,000 -20,000 10,20,000

g . Stockholders equity

Basic stock 10,40,000 4,40,000 -4,40,000 10,40,000

Extra paid in capital 16,00,000 2,40,000 -2,40,000 16,00,000

Held earnings 10,60,000 3,10,000 -3,10,000 10,60,000

All out Stockholders value

ekkarill92 answered 1 year ago
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