On January 1, 2020, Groenedal Company acquired 100 percent of the outstanding common stock of Aadorp Company. To acquire these shares, Groenedal issued 200,000 in long-term liabilities and 20,000 shares of common stock having a par value of 1 per share but a fair value of 10 per share. Groenedal paid 30,000 to accountants, lawyers and brokers for assistance in the acquisition and another 12,000 in connection with stock issuance costs.

Prior to these transactions, the balance sheets for the two companies were as follows:

	Groenedal, book value	Aadorp, book value
Cash	60,000	20,000
Receivables	270,000	90,000
Inventory	360,000	140,000
Land	200,000	180,000
Buildings (net)	420,000	220,000
Equipment (net)	160,000	50,000
Accounts payable	-150,000	-40,000
Long-term liabilities	-430,000	-200,000
Common stock ( 1 par value)	-110,000	-
Common stock ( 20 par value)	-	-120,000
Additional paid-in capital	-360,000	-
Retained earnings, 1/1/2020	-420,000	-340,000

In Groenedals appraisal of Aadorp, three accounts were undervalued on the subsidiarys books: Inventory by 5,000, Land by 20,000, and Buildings by 30,000. Groenedal plans to maintain Aadorps separate legal identity and to operate Aadorp as a wholly owned subsidiary.

Question 4

Determine the amounts that Groenedal Company would report in its postacquisition (single) balance sheet. In preparing the postacquisition balance sheet, any required adjustments to income accounts from the acquisition should be closed to Groenedals retained earnings.

Question 5

Prepare a worksheet to consolidate the balance sheets of these two companies as of January 1, 2020.