On January 1, 2024, Presidio Company acquired 100 percent of the outstanding common stock of Mason Company. To acquire these shares, Presidio issued to the owners of Mason $200,000 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. Presidio paid $30,000 to accountants, lawyers, and brokers for assistance in the acquisition and another $12,000 in connection with stock issuance costs.

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

Presidio’s appraisal of Mason’s fair values deemed three accounts to be undervalued: Inventory by $5,000, Land by $20,000, and Buildings by $30,000. Presidio plans to maintain Mason’s separate legal identity and to operate Mason as a wholly owned subsidiary.

a. Prepare Presidio’s journal entries to record its acquisition of Mason, related professional fees paid, and stock acquisition costs.

b. Separately determine each individual amount that Presidio Company would report in its consolidated balance sheet following the acquisition of Mason. Include in Presidio’s retained earnings any adjustments to income accounts from part (a). 

c. To verify the answers found in part (b), adjust Presidio’s column of accounts for the journal entries in part (a) and then prepare a worksheet to consolidate the balance sheets of these two companies at the acquisition date.

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Cash Receivables. Inventory Land Buildings (net) Equipment (net) Accounts payable Long-term liabilities Common stock-$1 par value Common stock-$20 par value. Additional paid-in capital... Retained earnings, 1/1/24 .. Presidio Company $ 60,000 270,000 360,000 200,000 420,000 160,000 (150,000) (430,000) (110,000) (360,000) (420,000) Mason Company $ 20,000 90,000 140,000 180,000 220,000 50,000 (40,000) (200,000) (120,000) -0- (340,000)