Pratt Company acquired all of Spider, Inc.s outstanding shares on December 31, 2018, for $495,000 cash. Pratt will operate Spider as a wholly owned subsidiary with a separate legal and accounting identity. Although many of Spiders book values approximate fair values, several of its accounts have fair values that differ from book values. In addition, Spider has internally developed assets that remain unrecorded on its books. In deriving the acquisition price, Pratt assessed Spiders fair and book value differences as follows:

PRATT COMPANY
Spider, Inc. outstanding stock
acquired by Pratt Company				100%
Cash paid by Pratt for acquisition				$ 495,000
Assessment of Spider's fair and book value differences:
			Book	Fair
			Values	Values
Computer software			$ 20,000	$ 70,000
Equipment			40,000	30,000
Client contracts			-	100,000
In-process research and development			-	40,000
Notes payable			(60,000)	(65,000)
December 31, 2018 Financial Information
			Pratt	Spider
Cash			$ 36,000	$ 18,000
Receivables			116,000	52,000
Inventory			140,000	90,000
Investment in Spider			495,000	-
Computer software			210,000	20,000
Buildings (net)			595,000	130,000
Equipment (net)			308,000	40,000
Client contracts			-	-
Goodwill			-	-
Total assets			$ 1,900,000	$ 350,000
Accounts payable			$ (88,000)	$ (25,000)
Notes payable			(510,000)	(60,000)
Common stock			(380,000)	(100,000)
Additional paid-in capital			(170,000)	(25,000)
Retained earnings			(752,000)	(140,000)
Total liabilities and equities			$ (1,900,000)	$ (350,000)