Question

On January 1, 2018, Marshall Company acquired 100 percent of the outstanding common stock of Tucker Company. To acquire these shares, Marshall issued $300,000 in long-term liabilities and 20,000 shares of common stock having a par value of $1 per share but a fair value of $10 per share. Marshall paid $29,000 to accountants, lawyers, and brokers for assistance in the acquisition and another $14,000 in connection with stock issuance costs.

Prior to these transactions, the balance sheets for the two companies were as follows:

	Marshall Company Book Value				Tucker Company Book Value
Cash	$	69,900			$	30,000
Receivables		364,000				117,000
Inventory		360,000				198,000
Land		280,000				194,000
Buildings (net)		482,000				308,000
Equipment (net)		160,000				72,900
Accounts payable		(210,000	)			(52,800	)
Long-term liabilities		(496,000	)			(300,000	)
Common stock—$1 par value		(110,000	)
Common stock—$20 par value						(120,000	)
Additional paid-in capital		(360,000	)			0
Retained earnings, 1/1/18		(539,900	)			(447,100	)

Note: Parentheses indicate a credit balance.

In Marshall’s appraisal of Tucker, it deemed three accounts to be undervalued on the subsidiary’s books: Inventory by $9,500, Land by $22,800, and Buildings by $33,000. Marshall plans to maintain Tucker’s separate legal identity and to operate Tucker as a wholly owned subsidiary.

A-Determine the amounts that Marshall Company would report in its postacquisition balance sheet. In preparing the postacquisition balance sheet, any required adjustments to income accounts from the acquisition should be closed to Marshall’s retained earnings. Other accounts will also need to be added or adjusted to reflect the journal entries Marshall prepared in recording the acquisition.

Cash
Receivables
Inventory
Land
Building Ne
Equipment net
total assets
accounts payable
long term liabilities
common stock
addtional paid in capital
retained earnings
Total liabilities and equities

B-To verify the answers found in part (a), prepare a worksheet to consolidate the balance sheets of these two companies as of January 1, 2018. (For accounts where multiple consolidation entries are required, combine all debit entries into one amount and enter this amount in the debit column of the worksheet. Similarly, combine all credit entries into one amount and enter this amount in the credit column of the worksheet.)

MARSHALL COMPANY AND CONSOLIDATED SUBSIDIARY Worksheet January 1, 2018 Accounts Marshall Company Tucker Company Consolidation Entries Consolidated Totals Debit Credit Cash Receivables Inventory Land Buildings (net) Equipment (net) Investment in Tucker Total assets Accounts payable Long-term liabilities Common stock Additional paid-in capital Retained earnings, 1/1/18 Total liabilities and owners' equities

Please show calculations, thanks.

Answer 1