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ive (Estimated Time: 45 to 65 Minutes) Following are the account balances of Miller Company and Rich- mond Company as of December 31. The fair values of Richmond Company's assets and liabilities are also listed. Miller Company Book Values 12/31 Richmond Company Book Values 12/31 Richmond Company Fair Values 12/31 $ 600,000 900,000 1,100,000 9.000.000 -0- Cash ................................ Receivables ........ Inventory Buildings and equipment (net) ... Unpatented technology..... In-process research and development. Accounts payable.. Notes payable Totals. Common stock-$20 par value... Common stock-$5 par value .. Additional paid-in capital... Retained earnings, 1/1... Revenues.. Expenses ........ Totals............................... $ 200,000 300,000 600,000 800,000 -O- -O- (200,000) (1.100,000) $ 600,000 $ 200,000 290,000 820,000 900,000 500,000 100,000 (200,000) (1,100,000) $1,510,000 -O- (400,000) (3,400,000) $ 7,800,000 $(2,000,000) (900,000) (2,300,000) (6,000,000) 3,400,000 $(7,800,000) $(220,000) (100,000) (130,000) (900,000) 750,000 $ (600,000) Note: Parentheses indicate a credit balance. Additional Information (not reflected in the preceding figures) On December 31, Miller issues 50,000 shares of its $20 par value common stock for all of the out- standing shares of Richmond Company, As part of the acquisition agreement, Miller agrees to pay the former owners of Richmond $250,000 if certain profit projections are realized over the next three years. Miller calculates the acquisition- date fair value of this contingency at $100,000. In creating this combination, Miller pays $10,000 in stock issue costs and $20,000 in accounting and legal fees. Required a. Miller's stock has a fair value of $32 per share. Using the acquisition method: 1. Prepare the necessary journal entries if Miller dissolves Richmond so it is no longer a separate legal entity. 2. Assume instead that Richmond will retain separate legal incorporation and maintain its own accounting systems. Prepare a worksheet to consolidate the accounts of the two companies. b. If Miller's stock has a fair value of $26 per share, describe how the consolidated balances would dif- fer from the results in requirement (a). ive (Estimated Time: 45 to 65 Minutes) Following are the account balances of Miller Company and Rich- mond Company as of December 31. The fair values of Richmond Company's assets and liabilities are also listed. Miller Company Book Values 12/31 Richmond Company Book Values 12/31 Richmond Company Fair Values 12/31 $ 600,000 900,000 1,100,000 9.000.000 -0- Cash ................................ Receivables ........ Inventory Buildings and equipment (net) ... Unpatented technology..... In-process research and development. Accounts payable.. Notes payable Totals. Common stock-$20 par value... Common stock-$5 par value .. Additional paid-in capital... Retained earnings, 1/1... Revenues.. Expenses ........ Totals............................... $ 200,000 300,000 600,000 800,000 -O- -O- (200,000) (1.100,000) $ 600,000 $ 200,000 290,000 820,000 900,000 500,000 100,000 (200,000) (1,100,000) $1,510,000 -O- (400,000) (3,400,000) $ 7,800,000 $(2,000,000) (900,000) (2,300,000) (6,000,000) 3,400,000 $(7,800,000) $(220,000) (100,000) (130,000) (900,000) 750,000 $ (600,000) Note: Parentheses indicate a credit balance. Additional Information (not reflected in the preceding figures) On December 31, Miller issues 50,000 shares of its $20 par value common stock for all of the out- standing shares of Richmond Company, As part of the acquisition agreement, Miller agrees to pay the former owners of Richmond $250,000 if certain profit projections are realized over the next three years. Miller calculates the acquisition- date fair value of this contingency at $100,000. In creating this combination, Miller pays $10,000 in stock issue costs and $20,000 in accounting and legal fees. Required a. Miller's stock has a fair value of $32 per share. Using the acquisition method: 1. Prepare the necessary journal entries if Miller dissolves Richmond so it is no longer a separate legal entity. 2. Assume instead that Richmond will retain separate legal incorporation and maintain its own accounting systems. Prepare a worksheet to consolidate the accounts of the two companies. b. If Miller's stock has a fair value of $26 per share, describe how the consolidated balances would dif- fer from the results in requirement (a)
