Purchase Using Cash and Using Stock Balance sheets for Prego Company and Sprague Company as of December 31, 2003, follow: LO7 Prego Company Sprague Company Cash $ 700,000 $111,000 Accounts Receivable (net) 892,000 230,000 Inventory 544,000 60,000 Property and Equipment (net) $1,927,000 $468,000 Land 120,000 94,000 Total Assets $4,183,000 $963,000 Accounts Payable $ 302,000 $152,000 Notes Payable 588,000 61,000 Long-Term Debt 350,000 90,000 Common Stock 1,800,000 500,000 Other Contributed Capital 543,000 80,000 Retained Earnings 600,000 80,000 Total Equities $4,183,000 $963,000 The fair values of Sprague Company’s assets and liabilities are equal to their book values.
Required:
Prepare a consolidated balance sheet as of January 1, 2004, under each of the following assumptions:
A. On January 1, 2004, Prego Company purchased 90% of the outstanding common stock of Sprague Company for $594,000.
B. On January 1, 2004, Prego Company exchanged 11,880 of its $20 par value common shares with a fair value of $50 per share for 90% of the outstanding common shares of Sprague Company. The transaction is a purchase.