In 2016, Tesla, Inc. acquired all of the outstanding stock of SolarCity Corporation. Tesla issued 0.110 shares of its common stock for each outstanding share of SolarCity, for a total of 11,124,497 shares. Fair value of Teslas stock at the date of acquisition was $185.04 per share. Tesla also converted SolarCity employee options and restricted stock unit awards into equivalent awards in Tesla stock. The fair value of vested awards was $87.5 million, and the fair value of unvested awards was $95.9 million. Merger-related costs, paid in cash, totaled $21.7 million.

Following are the estimated fair values of SolarCity assets acquired and liabilities assumed. Teslas balance sheet accounts are shown just prior to the acquisition. Book values for Tesla and SolarCity balance sheet accounts are assumed. Identifiable intangible assets acquired include developed technology, favorable leases, in-process R&D, and the trade name.

	Tesla		SolarCity
(in thousands)	Book Value Dr (Cr)		Book Value Dr (Cr)		Fair Value Dr (Cr)
Current assets	$5,800,000		$400,000		$480,020
Solar energy systems, leased and to be leased	--		4,800,000		5,781,496
Operating lease vehicles	3,134,000		--		--
Property, plant and equipment, net	5,781,000		800,000		1,056,312
Identifiable intangible assets	--		--		356,510
Other assets	526,000		904,196		838,772
Accounts payable and accrued liabilities	(4,300,000)		(475,000)		(468,668)
Debt and capital leases	(2,456,000)		(3,400,000)		(3,403,840)
Deferred revenue and other liabilities	(5,966,704)		(2,391,290)		(2,405,898)
Capital stock	(5,628,023)		(1,300,000)		n/a
Retained deficit	3,085,727		662,094		n/a
Accumulated other comprehensive loss	24,000		--		n/a
Total	$0		$0

Assume Tesla recorded the acquisition as a stock investment.

Required

a. Prepare the journal entry Tesla made to record the acquisition on its own books (in thousands).

Description		Debit	Credit
Investment in SolarCity		Answer	Answer
AnswerMerger expensesBargain gain		Answer	Answer
AnswerMerger expensesBargain gain		Answer	Answer
Capital stock		Answer	Answer
Capital stock stock options		Answer	Answer
Cash		Answer	Answer

b. Prepare a working paper to consolidate the balance sheet accounts of Tesla and SolarCity at the date of acquisition.

• Use negative signs with your credit balance answers in the Dr (Cr) columns (not in the Credit column).
• Enter answers in thousands.

Consolidation Working Paper
		Accounts Taken From Books
					Eliminations
(in thousands)		Tesla Dr (Cr)	SolarCity Dr (Cr)		Debit	Credit		Consolidated Balances Dr (Cr)
Current assets		Answer	$400,000	(R)	Answer			Answer
Solar energy systems			4,800,000	(R)	Answer			Answer
Operating lease vehicles		Answer		(R)				Answer
Property, plant and equipment		Answer	800,000	(R)	Answer			Answer
Investment in SolarCity		Answer				Answer	(E)	Answer
						Answer	(R)
Identifiable intangibles				(R)	Answer			Answer
Other assets		Answer	904,196			Answer	(R)	Answer
Accounts payable & accrued liabilities		Answer	(475,000)	(R)	Answer			Answer
Debt and capital leases		Answer	(3,400,000)			Answer	(R)	Answer
Deferred revenue & other liabilities		Answer	(2,391,290)			Answer	(R)	Answer
Capital stock		Answer	(1,300,000)	(E)	Answer			Answer
Retained deficit		Answer	(662,094)			Answer	(E)	Answer
AOCI		Answer						Answer
Total		Answer	$0		Answer	Answer		Answer

c. Prepare a consolidated balance sheet at the date of acquisition.

• Do not use negative signs with any of your answers below.
• Enter answers in thousands.

Tesla, Inc. Consolidated Balance Sheet, Date of Acquisition
(in thousands)
Assets				Liabilities
Current assets		Answer		Accounts payable & accrued liabilities		Answer
Solar energy systems		Answer		Debt and capital leases		Answer
Operating lease vehicles		Answer		Deferred revenue & other liabilities		Answer
Property, plant and equipment		Answer		Total liabilities		Answer
Identifiable intangibles		Answer		Shareholders equity
Other assets		Answer		Capital stock		Answer
				Retained deficit		Answer
				Accumulated other comp. loss		Answer
				Total equity		Answer
Total assets		Answer		Total liabilities and equity		Answer