Question
In: Accounting
On January 1, 2018 Casey Corporation exchanged $3,282,000 cash for 100 percent of the outstanding voting...
On January 1, 2018 Casey Corporation exchanged $3,282,000 cash for 100 percent of the outstanding voting stock of Kennedy Corporation. Casey plans to maintain Kennedy as a wholly owned subsidiary with separate legal status and accounting information systems.
At the acquisition date, Casey prepared the following fair-value allocation schedule:
| Fair value of Kennedy (consideration transferred) | $ | 3,282,000 | |||||
| Carrying amount acquired | 2,600,000 | ||||||
| Excess fair value | $ | 682,000 | |||||
| to buildings (undervalued) | $ | 353,000 | |||||
| to licensing agreements (overvalued) | (128,000 | ) | 225,000 | ||||
| to goodwill (indefinite life) | $ | 457,000 | |||||
Immediately after closing the transaction, Casey and Kennedy prepared the following postacquisition balance sheets from their separate financial records.
| Accounts | Casey | Kennedy | |||||
| Cash | $ | 441,000 | $ | 174,000 | |||
| Accounts receivable | 1,255,000 | 323,000 | |||||
| Inventory | 1,270,000 | 992,000 | |||||
| Investment in Kennedy | 3,282,000 | 0 | |||||
| Buildings (net) | 5,587,500 | 1,880,000 | |||||
| Licensing agreements | 0 | 3,010,000 | |||||
| Goodwill | 963,500 | 0 | |||||
| Total assets | $ | 12,799,000 | $ | 6,379,000 | |||
| Accounts payable | $ | (329,000 | ) | $ | (399,000 | ) | |
| Long-term debt | (3,470,000 | ) | (3,380,000 | ) | |||
| Common stock | (3,000,000 | ) | (1,000,000 | ) | |||
| Additional paid-in capital | 0 | (500,000 | ) | ||||
| Retained earnings | (6,000,000 | ) | (1,100,000 | ) | |||
| Total liabilities and equities | $ | (12,799,000 | ) | $ | (6,379,000 | ) | |
Prepare an acquisition-date consolidated balance sheet for Casey Corporation and its subsidiary Kennedy Corporation. (Negative amounts should be indicated by a minus sign.)
Solutions
Expert Solution
| consolidated balancesheet as of january 2018 | |||||||||
| figures in$ | figures in$ | figures in$ | |||||||
| Assets | Company C | company K | Consolidated | ||||||
| Cash | 441000 | 174000 | 615000 | ||||||
| Account receviable | 1255000 | 323000 | 1578000 | ||||||
| Inventory | 1270000 | 992000 | 2262000 | ||||||
| investment in K co* | 3282000 | 0 | 0 | (3282000-3282000) | |||||
| Building net* | 5587500 | 1880000 | 7820500 | (5587500+1880000+353000) | |||||
| licensing agreement* | 0 | 3010000 | 2882000 | 0+3010000-128000) | |||||
| goodwill* | 963500 | 0 | 1420500 | (963500+457000) | |||||
| total assets | 12799000 | 6379000 | 16578000 | ||||||
| Laibilities | |||||||||
| Accounts payable | 329000 | 399000 | 728000 | ||||||
| long term Debt | 3470000 | 3380000 | 6850000 | ||||||
| Stockholders equity | |||||||||
| common stock | 3000000 | 1000000 | 3000000 | ||||||
| Additional paid in capital | 0 | 500000 | 0 | ||||||
| retained earnings | 6000000 | 1100000 | 6000000 | ||||||
| Total laibilities & stockholders equity | 12799000 | 6379000 | 16578000 | ||||||
| Therefore the consolidated balancesheet assets & laibilities & stockholders equity is equal to $16578000 | |||||||||
| * investment = the consolidated ivestment in K will have 0 net value amount invested by co C is alsoamount received by company S | |||||||||
| * Building = the undervalued amount of building of co K is also added for consolidated balance | |||||||||
| * lisensing fees = the overvalued amount of licensing agreement of co k is deducted for consolidated value | |||||||||
| goodwill= the consolidated amount of goodwill is the value for co C + the indefinite value reported for co K | |||||||||
ekkarill92 answered 1 year agoRelated Solutions
On January 1, 2018 Casey Corporation exchanged $3,271,000 cash for 100 percent of the outstanding voting...
On January 1, 2018 Casey Corporation exchanged $3,271,000 cash
for 100 percent of the outstanding voting stock of Kennedy
Corporation. Casey plans to maintain Kennedy as a wholly owned
subsidiary with separate legal status and accounting information
systems.
At the acquisition date, Casey prepared the following fair-value
allocation schedule:
Fair value of
Kennedy (consideration transferred)
$
3,271,000
Carrying amount
acquired
2,600,000
Excess fair
value
$
671,000
to buildings
(undervalued)
$
378,000
to licensing
agreements (overvalued)
(188,000
)
190,000
to goodwill...
On January 1, 2018 Casey Corporation exchanged $3,244,000 cash for 100 percent of the outstanding voting...
On January 1, 2018 Casey Corporation exchanged $3,244,000 cash
for 100 percent of the outstanding voting stock of Kennedy
Corporation. Casey plans to maintain Kennedy as a wholly owned
subsidiary with separate legal status and accounting information
systems.
At the acquisition date, Casey prepared the following fair-value
allocation schedule:
Fair value of Kennedy (consideration transferred)
$
3,244,000
Carrying amount acquired
2,600,000
Excess fair value
$
644,000
to buildings (undervalued)
$
366,000
to licensing agreements (overvalued)
(196,000
)
170,000
to goodwill...
On January 1, 2021, Casey Corporation exchanged $3,250,000 cash for 100 percent of the outstanding voting...
On January 1, 2021, Casey Corporation exchanged $3,250,000 cash
for 100 percent of the outstanding voting stock of Kennedy
Corporation. Casey plans to maintain Kennedy as a wholly owned
subsidiary with separate legal status and accounting information
systems.
At the acquisition date, Casey prepared the following fair-value
allocation schedule:
Fair value of Kennedy (consideration transferred)
$
3,250,000
Carrying amount acquired
2,600,000
Excess fair value
$
650,000
to buildings (undervalued)
$
342,000
to licensing agreements (overvalued)
(160,000
)
182,000
to goodwill...
On January 1, 2015, Casey Corporation exchanged $3,218,000 cash for 100 percent of the outstanding voting...
On January 1, 2015, Casey Corporation exchanged $3,218,000 cash
for 100 percent of the outstanding voting stock of Kennedy
Corporation. Casey plans to maintain Kennedy as a wholly owned
subsidiary with separate legal status and accounting information
systems.
At the acquisition date, Casey prepared the following
fair-value allocation schedule:
Fair value of Kennedy (consideration
transferred)
$
3,218,000
Carrying amount acquired
2,600,000
Excess fair value
$
618,000
to buildings (undervalued)
$
326,000
to licensing agreements
(overvalued)
(171,000)
155,000
to...
On January 1, 2020, Pinnacle Corporation exchanged $3,527,500 cash for 100 percent of the outstanding voting...
On January 1, 2020, Pinnacle Corporation exchanged $3,527,500
cash for 100 percent of the outstanding voting stock of Strata
Corporation. On the acquisition date, Strata had the following
balance sheet:
Cash
$
284,000
Accounts payable
$
383,000
Accounts receivable
311,000
Long-term debt
3,060,000
Inventory
443,000
Common stock
1,500,000
Buildings (net)
1,920,000
Retained earnings
1,205,000
Licensing agreements
3,190,000
Total assets
$
6,148,000
Total liabilities and equity
$
6,148,000
Pinnacle prepared the following fair-value allocation:
Fair value of Strata (consideration transferred)
$...
On January 1, 2020, Pinnacle Corporation exchanged $3,477,500 cash for 100 percent of the outstanding voting...
On January 1, 2020, Pinnacle Corporation exchanged $3,477,500
cash for 100 percent of the outstanding voting stock of Strata
Corporation. On the acquisition date, Strata had the following
balance sheet:
Cash
$
94,000
Accounts payable
$
400,000
Accounts receivable
339,000
Long-term debt
2,880,000
Inventory
352,000
Common stock
1,500,000
Buildings (net)
2,160,000
Retained earnings
1,295,000
Licensing agreements
3,130,000
Total assets
$
6,075,000
Total liabilities and equity
$
6,075,000
Pinnacle prepared the following fair-value allocation:
Fair value of Strata (consideration transferred)
$...
On January 1, 2017, Pinnacle Corporation exchanged $3,527,500 cash for 100 percent of the outstanding voting...
On January 1, 2017, Pinnacle Corporation exchanged $3,527,500
cash for 100 percent of the outstanding voting stock of Strata
Corporation. On the acquisition date, Strata had the following
balance sheet:
Cash
$
284,000
Accounts payable
$
383,000
Accounts receivable
311,000
Long-term debt
3,060,000
Inventory
443,000
Common stock
1,500,000
Buildings (net)
1,920,000
Retained earnings
1,205,000
Licensing agreements
3,190,000
$
6,148,000
$
6,148,000
Pinnacle prepared the following fair-value allocation:
Fair value of Strata (consideration transferred)
$
3,527,500
Carrying amount acquired
2,705,000
Excess...
On January 1, 2017, Pinnacle Corporation exchanged $3,200,000 cash for 100 percent of the outstanding voting...
On January 1, 2017, Pinnacle Corporation exchanged $3,200,000
cash for 100 percent of the outstanding voting stock of Strata
Corporation. On the acquisition date, Strata had the following
balance sheet:
Cash
$
122,000
Accounts payable
$
375,000
Accounts receivable
283,000
Long-term debt
2,655,000
Inventory
350,000
Common stock
1,500,000
Buildings (net)
1,875,000
Retained earnings
1,100,000
Licensing agreements
3,000,000
$
5,630,000
$
5,630,000
Pinnacle prepared the following fair-value allocation:
Fair value of Strata (consideration transferred)
$
3,200,000
Carrying amount acquired
2,600,000
Excess...
On January 1, 2017, Pinnacle Corporation exchanged $3,200,000 cash for 100 percent of the outstanding voting...
On January 1, 2017, Pinnacle Corporation exchanged $3,200,000
cash for 100 percent of the outstanding voting stock of Strata
Corporation. On the acquisition date, Strata had the following
balance sheet:
Cash
$
122,000
Accounts payable
$
375,000
Accounts receivable
283,000
Long-term debt
2,655,000
Inventory
350,000
Common stock
1,500,000
Buildings (net)
1,875,000
Retained earnings
1,100,000
Licensing agreements
3,000,000
$
5,630,000
$
5,630,000
Pinnacle prepared the following fair-value allocation:
Fair value of Strata (consideration transferred)
$
3,200,000
Carrying amount acquired
2,600,000
Excess...
On January 1, 2017, Pinnacle Corporation exchanged $3,548,000 cash for 100 percent of the outstanding voting...
On January 1, 2017, Pinnacle Corporation exchanged $3,548,000
cash for 100 percent of the outstanding voting stock of Strata
Corporation. On the acquisition date, Strata had the following
balance sheet:
Cash
$
161,000
Accounts payable
$
436,000
Accounts receivable
290,000
Long-term debt
2,925,000
Inventory
415,000
Common stock
1,500,000
Buildings (net)
2,150,000
Retained earnings
1,360,000
Licensing agreements
3,205,000
$
6,221,000
$
6,221,000
Pinnacle prepared the following fair-value allocation:
Fair value of Strata (consideration transferred)
$
3,548,000
Carrying amount acquired
2,860,000
Excess...
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