Question
Pratt Company acquired all of Spider, Inc.'s outstanding shares on December 31, 2015, for $495,000 cash. Although many of Spider's book values approximate fair values,
Pratt Company acquired all of Spider, Inc.'s outstanding shares on December 31, 2015, for $495,000 cash. Although many of Spider's 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 Spider's fair and book value differences as follows:
Computer Software Book Value - $20,000 Fair Values - $70,000
Equipment BV- $40,000 FV - $30,000
Client contracts BV- $0 FV - $100,000
In-process research and development BV - $0 FV - $40,000
Notes Payable BV - ($60,000) FV - ($65,000)
At December 31, 2009, the following financial information is available for consolidation:
Cash (Pratt) $36,000 (Spider) $18,000
Receivables (Pratt) $116,000 (Spider) $52,000
Inventory (Pratt) $140,000 (Spider) $90,000
Investment in Spider (Pratt) $495,000 (Spider) $0
Computer Software (Pratt) $210,000 (Spider) $20,000
Buildings (net) (Pratt) $595,000 (Spider) $130,000
Equipment (net) (Pratt) $308,000 (Spider) $40,000
Client Contracts (Pratt) $0 (Spider) $0
Goodwill (Pratt) $0 (Spider) $0
Total assets (Pratt) $1,900,000 (Spider) $350,000
Accounts payable (Pratt) ($88,000) (Spider) ($25,000)
Notes Payable (Pratt) ($510,000) (Spider) ($60,000)
Common Stock (Pratt) ($380,000) (Spider) ($100,000)
Additional paid in capital (Pratt) ($170,000) (Spider) ($25,000)
Retained Earnings (Pratt) ($752,000) (Spider) ($140,000)
Total liabilities and equities (Pratt) ($1,900,000) (Spider) ($350,000)
Prepare a consolidated balance sheet for Pratt and Spider as of December 31, 2015.
PREPARE CONSOLIDATION BALANCE SHEET FOR PRATT AND SPIDER AS OF DECEMBER 31, 2015.??
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