Question
A parent acquires all of the outstanding common stock of a subsidiary for a cash purchase price of $1,600,000. One reason the parent agreed to
A parent acquires all of the outstanding common stock of a subsidiary for a cash purchase price of $1,600,000. One reason the parent agreed to pay more than book value for the subsidiary is because the net property, plant & equipment was undervalued by $320,000. On the date of acquisition, the parent and subsidiary report the following balance sheets:
Parent | Subsidiary | |
Assets | ||
cash | 960,000 | 320,000 |
receivables | 1,600,000 | 640,000 |
inventory | 1,920,000 | 1,280,000 |
PPE | 7,360,000 | 1,280,000 |
equity investment | 1,600,000 | 0 |
Totals | 13,440,000 | 3,520,000 |
liabilities and stockholders equity | ||
current liabilities | 640,000 | 640,000 |
bonds payable | 1,600,000 | 1,600,000 |
common stock | 5,120,000 | 320,000 |
additional paid in capital | 3,840,000 | 384,000 |
retained earnings | 2,240,000 | 576,000 |
13,440,000 | 3,520,000 |
Prepare the consolidation spreadsheet on the date of the acquisition.
Note: The label for consolidation step has been provided if there is more than one adjustment to the account.
Note: Not all answer fields will be used, leave unused answer fields blank.
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