On January 2, 1999, Brown Company acquired \(60 \%\) of the voting common stock of Cobb Company for \(\$ 720,000\) cash. The excess of cost over book value was due to above-average earnings prospects. Brown has hired you to help it prepare consolidated financial statements and has already collected the following information for both companies as of January 2, 1999:

a. Brown believes that consolidated financial statements can be prepared simply by adding together the amounts in the two individual columns. Is this correct? If not, why not?

b. Prepare a consolidated balance sheet for the date of acquisition without preparing a consolidated statement work sheet.

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Brown Cobb Company Company Assets Cash Accounts receivable, net Merchandise inventory Investment in Cobb Company Plant and equipment, net Total assets Liabilities and Stockholders' Equity 72,000 $ 54.000 108,000 126,000 288,000 216,000 720,000 936,000 738,000 $2,124,000 $1,134,000 Accounts payable Common stock Retained earnings Total liabilities and stockholders' equity $ 144,000 54,000 1,440,000 720,000 540,000 360,000 $2,124,000 $1,134,000