Determining ending balances of accounts on the consolidated balance sheet
Assume that the parent company acquires its subsidiary by exchanging 75,400 shares of its Common Stock, with a fair value on the acquisition date of $30 per share, for all of the outstanding voting shares of the investee. In its analysis of the investee company, the parent values all of the subsidiaryâs assets and liabilities at an amount equaling their book values except for a building that is undervalued by $480,000, an unrecorded License Agreement with a fair value of $230,000, and an unrecorded Customer List owned by the subsidiary with a fair value of $120,000. Any further discrepancy between the purchase price and the book value of the subsidiaryâs Stockholdersâ Equity is attributed to expected synergies to be realized by the consolidated company as a result of the acquisition.
a. Given the following acquisition-date balance sheets of the parent and subsidiary, at what amounts will each of the following be reported on the consolidated balance sheet? (see table numbered 1-7 to answer)
Balance Sheet Parent Subsidiary Assets Cash $728,400 $181,440 Accounts receivable 307,200 375,840 Inventory 465,600 482,760 Equity investment 2,262,000 Property, plant and equipment (PPE), net 2,000,000 893,160 Total Assets $5,763,200 $1,933,200 Liabilities and stockholdersâ equity Accounts payable $150,480 $114,300 Accrued liabilities 176,640 198,900 Long-term liabilities 1,062,320 540,000 Common stock 176,000 108,000 APIC 2,992,000 135,000 Retained earnings 1,205,760 837,000 Total Liabilities and stockholdersâ equity $5,763,200 $1,933,200
1. Accounts Receivable $_________ 2. Equity Investment $_________
3. PPE, net $________ 4. Goodwill $________ 5. Common Stock $________ 6. APIC $________ 7. Retained Earnings $________
b. What intangible assets will be reported on the consolidated balance sheet and at what amounts?
License Agreement $________ Customer List $________
Goodwill $________
Determining ending balances of accounts on the consolidated balance sheet
Assume that the parent company acquires its subsidiary by exchanging 75,400 shares of its Common Stock, with a fair value on the acquisition date of $30 per share, for all of the outstanding voting shares of the investee. In its analysis of the investee company, the parent values all of the subsidiaryâs assets and liabilities at an amount equaling their book values except for a building that is undervalued by $480,000, an unrecorded License Agreement with a fair value of $230,000, and an unrecorded Customer List owned by the subsidiary with a fair value of $120,000. Any further discrepancy between the purchase price and the book value of the subsidiaryâs Stockholdersâ Equity is attributed to expected synergies to be realized by the consolidated company as a result of the acquisition.
a. Given the following acquisition-date balance sheets of the parent and subsidiary, at what amounts will each of the following be reported on the consolidated balance sheet? (see table numbered 1-7 to answer)
Balance Sheet | Parent | Subsidiary |
---|---|---|
Assets | ||
Cash | $728,400 | $181,440 |
Accounts receivable | 307,200 | 375,840 |
Inventory | 465,600 | 482,760 |
Equity investment | 2,262,000 | |
Property, plant and equipment (PPE), net | 2,000,000 | 893,160 |
Total Assets | $5,763,200 | $1,933,200 |
Liabilities and stockholdersâ equity | ||
Accounts payable | $150,480 | $114,300 |
Accrued liabilities | 176,640 | 198,900 |
Long-term liabilities | 1,062,320 | 540,000 |
Common stock | 176,000 | 108,000 |
APIC | 2,992,000 | 135,000 |
Retained earnings | 1,205,760 | 837,000 |
Total Liabilities and stockholdersâ equity | $5,763,200 | $1,933,200 |
1. | Accounts Receivable $_________ | |
2. | Equity Investment $_________ |
3. | PPE, net $________ | |
4. | Goodwill $________ | |
5. | Common Stock $________ | |
6. | APIC $________ | |
7. | Retained Earnings | $________ |
b. What intangible assets will be reported on the consolidated balance sheet and at what amounts?
License Agreement $________ | |
Customer List $________ Goodwill $________ |