Question
. Mendol Corporation purchased 100% of the common stock of Carbury Inc. on January 2, 2014. Carnac's balance sheet on January 2, 2014 was as
. Mendol Corporation purchased 100% of the common stock of Carbury Inc. on January 2, 2014. Carnac's balance sheet on January 2, 2014 was as follows:
Mendol | Carbury Inc. | |
Accounts receivable-net | $ 720,000 | $180,000 |
Inventory | 1,440,000 | 360,000 |
Land | 160,000 | 40,000 |
Building-net | 240,000 | 60,000 |
Equipment-net | 320,000 | 80,000 |
Equity Investment | 560,000 | |
Total Assets | $ 3,440,000 | $720,000 |
Current liabilities | $ 280,000 | $70,000 |
Long term debt | 640,000 | 160,000 |
Common stock ($1 par) | 80,000 | 20,000 |
Paid-in capital | 1,720,000 | 430,000 |
Retained earnings | 720,000 | 40,000 |
Total Liabilities & Equity | $ 3,440,000 | $720,000 |
Fair values agree with book values except for inventory, land, and equipment that have fair values of $400,000, $50,000 and $70,000, respectively. Carbury has unrecorded patent rights valued at $20,000.
Required:
a. | Prepare a schedule to allocate the purchase price to Carbury's assets and liabilities assuming Mendol paid $560,000 cash for the acquisition. |
b. | Prepare the consolidation worksheet with entries for a January 2, 2014 consolidated balance sheet. |
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