Assume the Parent company acquires its subsidiary by exchanging 35,000 shares of its Common Stock, with a fair value on the acquisition date of $60 per share, for all of the outstanding voting shares of the investee. In its analysis of the investee company, the parent values all of the subsidiary’s assets and liabilities at an amount equaling their book values except for an unrecorded Patent owned by the subsidiary with a fair value of $200,000. Any further discrepancy between purchase price and the book value of the subsidiary’s Stockholders’ Equity is attributed to expected synergies to be realized by the consolidated company as a result of the acquisition.

1. How much is the consideration paid to acquire the subsidiary on the acquisition date?
2. How much Goodwill is recognized?
3. Prepare the consolidation worksheet on the date of acquisition given the balance sheets of the parent and subsidiary on that date.

			Consolidation Entries
	Parent	Subsidiary		Dr		Cr	Consolidated
Assets:
Cash	100,600	55,000
Accounts receivable	75,000	180,000
Inventory	550,000	225,000
Equity investment	2,100,000
Property, plant and equipment (PPE), net	2,500,000	850,000
Patent
Goodwill
	5,325,600	1,310,000
Liabilities and stockholders' equity:
Accounts payable	78,000	85,000
Accrued liabilities	225,000	135,000
Long-term liabilities	450,000	500,000
Common stock	1,884,600	350,000
APIC	2,141,000	150,000
Retained earnings	547,000	90,000
	5,325,600	1,310,000		0		0