Question
Pebble Company pays $60 million in cash to acquire all of the stock of Speck Company. The balance sheets of Pebble and Speck just after
Pebble Company pays $60 million in cash to acquire all of the stock of Speck Company. The balance sheets of Pebble and Speck just after the acquisition are as follows:
(in millions) | Pebble | Speck |
Current assets | $ 140 | $ 40 |
Plant assets, net | 2,000 | 1,200 |
Investment in Speck | 60 | -- |
$2,200 | $1,240 | |
Liabilities | $ 400 | $1,200 |
Capital stock | 1,700 | 50 |
Retained earnings | 100 | (10) |
Total | $2,200 | $1,240 |
Specks assets and liabilities are reported at amounts that approximate fair value at the date of acquisition, and there are no unreported net assets.
Required :
a. Prepare the consolidated balance sheet for Pebble and Speck at the date of acquisition.
b. Now assume Pebble reports its investment in Speck using the equity method. Present Pebbles balance sheet
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