Push Down Accounting On January 2, 2004, Press Company purchased on the open market 90% of the outstanding common stock of Sensor Company for $800,000 cash. Balance sheets for Press Company and Sensor Company on January 1, 2004, just before the stock acquisition by Press Company, were: LO2 Press Company Sensor Company Cash $1,065,000 $ 38,000 Receivables 422,500 76,000 Inventory 216,500 124,000 Building (net) 465,000 322,000 Equipment (net) 229,000 185,000 Land 188,000 100,000 Patents 167,500 88,000 Total Assets $2,753,500 $ 933,000 Liabilities $ 667,000 $ 249,000 Common Stock 700,000 300,000 Other Contributed Capital 846,000 164,000 Retained Earnings 540,500 220,000 Total Equities $2,753,500 $ 933,000 The full implied value of Sensor Company is to be “pushed down” and recorded in Sensor Company’s books. The excess of the implied fair value over the book value of net assets acquired is allocated as follows: To equipment, 30%; to land, 20%; to patents, 50%.
Required:
A. Prepare the entry on Sensor Company’s books on January 2, 2004, to record the values implied by the 90% stock purchase by Press Company.
B. Prepare a consolidated balance sheet workpaper on January 1, 2004.