Question
On January 1, 2013, Marshall Company acquired 100 percent of the outstanding common stock of Tucker Company. To acquire these shares, Marshall issued $286,600 in
| On January 1, 2013, Marshall Company acquired 100 percent of the outstanding common stock of Tucker Company. To acquire these shares, Marshall issued $286,600 in long-term liabilities and 21,100 shares of common stock having a par value of $1 per share but a fair value of $10 per share. Marshall paid $20,900 to accountants, lawyers, and brokers for assistance in the acquisition and another $10,250 in connection with stock issuance costs. |
| Prior to these transactions, the balance sheets for the two companies were as follows: |
| Marshall Company Book Value | Tucker Company Book Value | |||
| Cash | $ | 52,000 | $ | 20,450 |
| Receivables | 290,000 | 100,800 | ||
| Inventory | 343,000 | 158,000 | ||
| Land | 203,000 | 180,000 | ||
| Buildings (net) | 434,000 | 311,000 | ||
| Equipment (net) | 258,000 | 55,250 | ||
| Accounts payable | (197,000) | (48,500) | ||
| Long-term liabilities | (488,000) | (228,000) | ||
| Common stock$1 par value | (110,000) | |||
| Common stock$20 par value | (120,000) | |||
| Additional paid-in capital | (360,000) | 0 | ||
| Retained earnings, 1/1/13 | (425,000) | (429,000) | ||
Note: Parentheses indicate a credit balance.
| In Marshalls appraisal of Tucker, it deemed three accounts to be undervalued on the subsidiarys books: Inventory by $5,200, Land by $30,300, and Buildings by $32,100. Marshall plans to maintain Tuckers separate legal identity and to operate Tucker as a wholly owned subsidiary. |
| a. | Determine the amounts that Marshall Company would report in its postacquisition balance sheet. In preparing the postacquisition balance sheet, any required adjustments to income accounts from the acquisition should be closed to Marshalls retained earnings. (Input all amounts as positive values.) |
| Consolidated Totals | |
| Cash | $ |
| Receivables | |
| Inventory | |
| Land | |
| Buildings | |
| Equipment | |
| Total assets | $ |
| Accounts payable | $ |
| Long-term liabilities | |
| Common stock | |
| Additional paid-in capital | |
| Retained earnings | |
| Total liabilities and equities | $ |
| b. | Prepare a worksheet to consolidate the balance sheets of these two companies as of January 1, 2013. (Leave no cells blank - be certain to enter "0" wherever required. Enter the consolidation entries of 'Investment in Tucker Company' in order of (S) Elimination of subsidiarys stockholders equity and (A) Allocation of Tucker's consideration fair value in excess of book value. Input all amounts as positive values except for the credit balances which should be entered with the minus sign.) |
| MARSHALL COMPANY AND CONSOLIDATED SUBSIDIARY Worksheet January 1, 2013 | |||||||||
| Marshall | Tucker | Consolidation Entries | Consolidated | ||||||
| Accounts | Company | Company | Debit | Credit | Totals | ||||
| Cash | |||||||||
| Receivables | |||||||||
| Inventory | |||||||||
| Land | |||||||||
| Buildings (net) | |||||||||
| Equipment (net) | |||||||||
| Investment in Tucker | |||||||||
| Total assets | |||||||||
| Accounts payable | |||||||||
| Long-term liabilities | |||||||||
| Common stock | |||||||||
| Additional paid-in capital | |||||||||
| Retained earnings, 1/1/13 | |||||||||
| Total liabilities and owners' equities | |||||||||
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Financial Accounting Tools for business decision making
Authors: Paul D. Kimmel, Jerry J. Weygandt, Donald E. Kieso
6th Edition
978-1119191674, 047053477X, 111919167X, 978-0470534779
