X LO4, 63. Consolidation at date of acquisition (purchase price greater than book value, acquisition journal entries, deferred tax liability) Assume the parent company acquires its subsidiary in a "nontaxable" transaction by exchanging 60,000 shares of its $2 par value Common Stock, with a fair value on the acquisition date of $10 per share, for all of the outstanding voting shares of the investee. In its analysis of the investee company, the fair value of each of the subsidiary's assets and liabilities equals their respective book values except for Property, Plant and Equipment (PPE) assets that are undervalued by $40,000, an unrecorded Customer List with a fair value of $64,000, and an unrecorded Brand Name asset valued at $96,000. And, finally, assume the tax bases of the subsidiary's pre-acquisition identifiable net assets equal their book values. The parent company's effective tax rate is 22%. a. Prepare the journal entry that the parent makes to record the acquisition. b. Given the following acquisition-date balance sheets for the parent and its subsidiary, prepare the consolidation spreadsheet. Balance Sheet Parent Subsidiary Assets: Cash. 80,000 $ 32,000 Accounts receivable 120,000 48,000 Inventory.. 280,000 240,000 Equity investment. 600,000 Property, plant and equipment (PPE), net. Customer List 1,200,000 400,000 Brand Name Goodwill Liabilities and stockholders' equity: Accounts payable. Accrued liabilities Long-term liabilities Deferred Income tax liability Common stock. APIC..... Retained earnings 100,000 640,000 $2,280,000 $ 720,000 $ 60,000 $ 48,000 80,000 240,000 200,000 32,000 800,000 80,000 480,000 240,000 $2,280,000 $ 720,000