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Determining ending balances of accounts on the consolidated balance sheet Assume that the parent company acquires its subsidiary by exchanging 75,400 shares of its Common

Determining ending balances of accounts on the consolidated balance sheet Assume that the parent company acquires its subsidiary by exchanging 75,400 shares of its Common Stock, with a fair value on the acquisition date of $30 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 subsidiarys assets and liabilities at an amount equaling their book values except for a building that is undervalued by $480,000, an unrecorded License Agreement with a fair value of $230,000, and an unrecorded Customer List owned by the subsidiary with a fair value of $120,000. Any further discrepancy between the purchase price and the book value of the subsidiarys Stockholders Equity is attributed to expected synergies to be realized by the consolidated company as a result of the acquisition. a. Given the following acquisition-date balance sheets of the parent and subsidiary, at what amounts will each of the following be reported on the consolidated balance sheet? b. What intangible assets will be reported on the consolidated balance sheet and at what amounts? Parent Sub

Assets Cash $728,400

$181,440

Accounts receivable307,200 375,840

Inventory465,600 482,760

Equity investment2,262,000

Property, plant and equipment (PPE), net2,000,000 893,160 Parent Ending $5,763,200 Sub Ending $1,933,200

Liabilities and stockholders equity Accounts payable$150,480 $114,300 Accrued liabilities176,640 198,900 Long-term liabilities1,062,320 540,000 Common stock176,000 108,000 APIC 2,992,000 135,000 Retained earnings1,205,760 837,000 Parent Ending $5,763,200 Sub Ending $1,933,200

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