Question
On January 1, 2018 Casey Corporation exchanged $3,300,000 cash for 100 percent of the outstanding voting stock of Kennedy Corporation. Casey plans to maintain Kennedy
On January 1, 2018 Casey Corporation exchanged $3,300,000 cash for 100 percent of the outstanding voting stock of Kennedy Corporation. Casey plans to maintain Kennedy as a wholly owned subsidiary with separate legal status and accounting information systems.
At the acquisition date, Casey prepared the following fair-value allocation schedule:
Fair value of Kennedy (consideration transferred) | $ | 3,300,000 | |||||
Carrying amount acquired | 2,600,000 | ||||||
Excess fair value | $ | 700,000 | |||||
to buildings (undervalued) | $ | 382,000 | |||||
to licensing agreements (overvalued) | (108,000 | ) | 274,000 | ||||
to goodwill (indefinite life) | $ | 426,000 | |||||
Immediately after closing the transaction, Casey and Kennedy prepared the following postacquisition balance sheets from their separate financial records.
Accounts | Casey | Kennedy | |||||
Cash | $ | 457,000 | $ | 172,500 | |||
Accounts receivable | 1,655,000 | 347,000 | |||||
Inventory | 1,310,000 | 263,500 | |||||
Investment in Kennedy | 3,300,000 | 0 | |||||
Buildings (net) | 6,315,000 | 2,090,000 | |||||
Licensing agreements | 0 | 3,070,000 | |||||
Goodwill | 347,000 | 0 | |||||
Total assets | $ | 13,384,000 | $ | 5,943,000 | |||
Accounts payable | $ | (394,000 | ) | $ | (393,000 | ) | |
Long-term debt | (3,990,000 | ) | (2,950,000 | ) | |||
Common stock | (3,000,000 | ) | (1,000,000 | ) | |||
Additional paid-in capital | 0 | (500,000 | ) | ||||
Retained earnings | (6,000,000 | ) | (1,100,000 | ) | |||
Total liabilities and equities | $ | (13,384,000 | ) | $ | (5,943,000 | ) | |
Prepare an acquisition-date consolidated balance sheet for Casey Corporation and its subsidiary Kennedy Corporation. (Negative amounts should be indicated by a minus sign.)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-text-image.webp)
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Step: 3
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started