Question

Pratt Company acquired all of Spider, Inc.’s outstanding shares on December 31, 2018, for $484,450 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	$	24,500			$	78,500
Equipment		65,500				49,800
Client contracts		0				129,500
In-process research and development		0				21,500
Notes payable		(76,000	)			(82,600	)

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

	Pratt				Spider
Cash	$	10,750			$	14,500
Receivables		116,500				50,500
Inventory		142,500				86,500
Investment in Spider		484,450				0
Computer software		213,500				24,500
Buildings (net)		608,250				131,500
Equipment (net)		383,000				65,500
Client contracts		0				0
Goodwill		0				0
Total assets	$	1,958,950			$	373,000
Accounts payable	$	(91,200	)		$	(31,500	)
Notes payable		(521,750	)			(76,000	)
Common stock		(380,000	)			(100,000	)
Additional paid-in capital		(170,000	)			(25,000	)
Retained earnings		(796,000	)			(140,500	)
Total liabilities and equities	$	(1,958,950	)		$	(373,000	)

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

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

Please show calculations, thanks.

Answer 1