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# 2 Adv Acct.xls _103K_ - Homework Help_ Online Tutoring in Math

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```									P2-14:      Goodwill = \$690,000

The following book and fair values were available for Westmont Company as of March 1.

Book Value                  Fair Value
Inventory                             \$630,000                   \$600,000
Land                                    750,000                    990,000
Buildgings                            1,700,000                  2,000,000
Customer relationships                        0                    800,000
Accounts Payable                        -80,000                     -80,000
Common stock                         -2,000,000
Retained earnings 1/1                  -360,000
Revenues                               -420,000
Expenses                                280,000

Arturo Company pays \$4,000,000 cash and issues 20,000 sahres of its \$2 par value common
stock (fair value of \$50 per share) for all of Westmont's common stock in a merger, after which
Westmont wil cease to exist as a separate entity. Stock issue costs amount to \$25,000 and
Arturo pays \$42,000 for legal fees to compete the transaction. Prepare Arturo's journal entry to
record its acquisition of Westmont.
P2-17: Goodwill = \$50,000, Net Income = \$210,000

On June 30, 2011, Wisconsin, Inc., issues \$3000,000 in debt and 15,000 new shares of its
\$10 par value stock to Badger Company owners in eschange for all of the outstanding shares of
that company. Wisconsin shares had a fair value of \$40 per share. Prior to the combination, the
financial statements for Wisconsin and Badger for the six-moth period ending June 30,2011,
were as follows:
Revenues                                        (\$900,000)                         -300,000
Expenses                                           660,000                          200,000
Net income                                  (\$240,000)                         -100,000
Retained earnings, 1/1                       \$ (800,000)                           -200,000
Net income                                        -240,000                         -100,000
Dividends paid                                       90,000                               0
Retained earnings, 6/30                  \$ (950,000)                 \$        (300,000)
Cash                                         \$      80,000                     \$ 110,000
Receivables and inventory                         400,000                          170,000
Patented technology (net)                          900,000                          300,000
Equipment (net)                                    700,000                          600,000
Total assets                             \$ 2,080,000                        \$1,180,000
Liabilities                                  \$ (500,000)                           -410,000
Common Stock                                      -360,000                         -200,000
Retained earnings                                 -950,000                         -300,000
Total liabilities and equities           \$ (2,080,000)                       -1,180,000

Wisconsin also paid \$30,000 to a broker for arranging the transaction. In addition, Wisconsin paid
\$40,000 in stock issueance costs. Badger's equipment was actually worth \$700,000, but its
patented technology was valued at only \$280,000.
What are the consolidated balances for the following accounts?

a. Net income
b. Retained 1/1/11
c. Patented technology
d. Goodwill
e. Liabilties
f. Common stock
Pratt Company acquired all of Sprider, Inc's outstanding sahres on December 31, 2011, for \$495,000
cash. Pratt will operate Spider as a wholly owned subsidiary with a separate leagal and accounting
identity. 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 Sprider's fair and book value
differences as follows:
Book Values                Fair Values

Computer software                                  \$20,000                \$70,000
Equipment                                            40,000                 30,000
Client contracts                                          0                100,000
In-process research and development                       0                 40,000
Notes payable                                       -60,000                -65,000

At December 31, 2011, the following financial information is available for consolidation:
(Please refer to the next tab - P02-20 Entry for financial information)

Prepare a consolidated balance sheet for Pratt and Spider as of December 31, 2011
Student Name:
Problem 02-20

- Purchase price and account allocation

Consideration transferred at fair value
Book value
Excess fair over book value
Allocation of excess fair value to
specific assets and liabilities
-to Computer software
-to Equipment
-to Client contracts
-to IPR&D
-to Notes payable
Goodwill

PRATT COMPANY AND SPIDER, INC.
Consolidation Worksheet
December 31, 2011

Consolidation Entries        Consolidated
Accounts                   Pratt         Spicer        Debit              Credit     Totals
Cash                             \$      36,000     \$   18,000                                  \$    54,000     Correct!
Receivables                            116,000         52,000                                      168,000     Correct!
Inventory                              140,000         90,000                                      230,000     Correct!
Investment in Spider                   495,000             -                                       495,000    Try again!

Computer software                      210,000         20,000                                      230,000    Try again!
Buildings (net)                        595,000        130,000                                      725,000     Correct!
Equipment (net)                        308,000         40,000                                      348,000    Try again!
Client contracts                           -              -                                            -      Try again!
R&D asset                                                                                              -      Try again!
Goodwill                                   -              -                                            -      Try again!
Total assets                         1,900,000        350,000                                  \$ 2,250,000    Try again!

Accounts payable                        (88,000)      (25,000)                                     (113,000) Correct!
Notes payable                          (510,000)      (60,000)                                     (570,000) Try again!
Common stock                           (380,000)     (100,000)                                     (480,000) Try again!
Additional paid-in capital             (170,000)      (25,000)                                     (195,000) Try again!
Retained earnings                      (752,000)     (140,000)                                     (892,000) Try again!
Total liabilities and equities       (1,900,000)     (350,000)                                 \$ (2,250,000) Try again!
Student Name:
Problem 02-20

PRATT COMPANY AND SUBSIDIARY
Consolidated Balance Sheet
December 31, 2011

Cash
Receivables
Inventory
Computer software
Buildings (net)
Equipment (net)
Client contracts
R&D asset
Goodwill
Total assets

Accounts payable
Notes payable
Common stock
Retained earnings
Total liabilities and equities
Try again!

Try again!

Try again!
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Try again!
Problem 21

Case 1:          Fair value of consideration transferred
Fair value of net identifiable assets
Excess to goodwill

Journal Entry:                                                    Debit
Current Assets
Building
Land
Goodwill
Liabilities
Cash

Case 2:

Fair value of consideration transferred
Fair value of net identifiable assets
Gain on bargain purchase

Journal Entry:                                                    Debit
Current Assets
Building
Land
Gain on bargain purchase
Liabilities
Cash

Allerton Company aquires all Deluxe Company's assets and liabilties for cash on January 1, 2011, and subsequently
formally dissolves Deluxe. At the acquisition date, the following book and fair values were available for the Deluxe
company accounts:
Book Values
Current Assets                                                                                   \$60,000
Building                                                                                           90,000
Land                                                                                               10,000
Goodwill                                                                                           15,000
Liabilties                                                                                        -40,000
Common Stock                                                                                     -100,000
Retained Earnings                                                                                 -35,000

Using the acquisition method, prepare Allerton's entry to record its acquisition of Deluxe in its accounting records
assuming the following cash exchange amounts:
1. \$145,000
2. \$110,000
Credit

Credit

, 2011, and subsequently
vailable for the Deluxe

Fair Values
\$60,000
50,000
20,000
30,000
?
-40,000

ts accounting records
On June 30, 200X Carl Corporation purchased Lin Company by issuing 50,000 shares of stock. Stock has
a market value of \$15.00 per share. This acquisition is to be recorded as a statutory merger through asset
acquisition. In this type of business combination Carl company acquires all the assets and liabilities of Lin
Company. Lin Company is dissolved and goes out of business. Prepare the entries the purchase and
combination on June 30, 200X.
Extra Problem 1 Merger: Goodwill = \$30,000
Following information is shown prior to the merger activity being recorded:

Carl Company

Assets                                              Liabilities and Capital

Cash                                       \$80,000                Current Liabilities                       \$80,000
Inventories                                  80,000
Plant                                       300,000               Common Stock \$5PV                           10,000
Land                                         20,000               Additional Paid in Capital                 190,000
Retained Earnings                          200,000
Total                                  \$480,000                  Total                                  \$480,000

Lin Company

Assets                                                     Liabilities and Capital

Cash                                                  \$200,000                Current Liabilities                      \$100,000
Accounts Receivable                                      20,000               Common Stock \$10PV                         150,000
Plant Assets                                            530,000               Additional Paid in Capital                 400,000
Retained Earnings                          100,000
Total                                              \$750,000                  Total                                  \$750,000

Other information:
The Lin Company Plant Assets fair market value is \$600,000.
The out of pocket costs of the merger are:

SEC Registration Statement fee                                                      \$20,000
Legal fees for the SEC Registration Statement                                       \$15,000
Accounting fees for the SEC Registration Statement                                   \$5,000
Finders Fee                                                                          \$6,000
Legal fees for the merger                                                            \$2,000
Accounting fees for the merger                                                       \$4,000

1. Prepare and post the entries to record this as a statutory merger. In a statutory merger permanent
dissolution of the subsidiary occurs at the combination date.
2. Prepare an after merger balance sheet.
Carl Corporation General Ledger

Cash                              Plant                               Liabilities
Template Extra Problem 1 Statutory Merger                  80,000

SEC Registration Fee          20,000   stock issue
SEC Registration legal fees   20,000   stock issue
Finder's fee                   6,000   merger
Merger legal fees              2,000   merger
Merger accounting fees         4,000   merger        Accounts Receivable                       Land                               Capital Stock
52,000                                                       20,000

Merger Expense                                              Inventory                   Investment in Lin Co.                    Paid in Capital
Cash
0
Paid in Capital
Cash                                                     Goodwill
Merger Expense                        Retained Earnings
Investment in Lin Company
Common Stock
Paid in Capital

Cash
Accounts receivable                                                             Carl Corporation
Plant                                                                             Balance Sheet
Goodwill                                                                   Assets                      Liabilities and Equity
Liabilities                                                    Cash                                 Liabilities
Investment in Lin Co.                                          Accts. Rec.
Inventory                            Capital Stock
Plant                                Paid in capital
Land                                 Retained earnings
Computation of Goodwill                                           Goodwill
Fair Value of Consideration                                         Total                               Total
transferred
Book value of Lin Co.
Excess fair value over book
Allocated to plant
Goodwill   30,000
ADVANCED ACCOUNTING UNIT 2 EXTRA PROBLEM – SEPARATE SUBSIDIARY

On June 30, 200X P paid \$375,000 cash for 100% of the Common Stock of S Company. The
transaction is an acquisition of wherein the acquired company is not dissolved. S Company is
maintained as a separate subsidiary of P Company. It is still an entity, but in this case P
Company owns all of it’s stock
Extra Problem 2 Subsidiary: Goodwill = \$115,000
Following information is shown prior to acquisition being recorded:

P Company

Assets                                                 Liabilities and Capital

Cash                         \$580,000             Current Liabilities                                \$90,000
Inventories                     60,000            Common Stock \$5PV                                   100,000
Plant Assets                   340,000            Additional Paid in Capital                          200,000
Retained Earnings                                   590,000
Total                      \$980,000              Total                                            \$980,000

S Company

Assets                                                                 Liabilities and Capital

Inventories                    \$20,000            Current Liabilities                                \$30,000
Other Assets                     40,000           Long Term Liabilities                                50,000
Plant Assets                    140,000           Common Stock \$10 PV                                  40,000
Retained Earnings                                    60,000
Total                       \$200,000               Total                                           \$200,000

Differences between identifiable net assets of S Company were:
Current Fair Value        Book Value                       Difference
Inventories                     \$50,000             \$20,000                               \$30,000
Plant                            250,000             140,000                               110,000

A. Prepare the journal entries showing the purchase
B. Prepare a schedule showing the amount of goodwill from this purchase.
C Prepare a consolidation worksheet showing the eliminations.
D. Prepare a consolidated balance sheet AS OF June 30, 200X using the consolidation
worksheet as a basis.
Extra Problem 2 Separate Subsidiary Template
A. JOURNAL ENTRY:

Investment in S Company
Cash

Ledger T Accounts
Cash

Investment in S

B. COMPUTATION OF GOODWILL

Computation of Goodwill
Fair Value of Consideration
transferred
Book value of S Co.
Excess fair value over book
Allocated to inventory
Allocated to building
Goodwill                                 115,000
C. CONSOLIDATION WORKSHEET

P CORPORATION AND S CO.
WORKING PAPER FOR CONSOLIDATED BALANCE SHEET
6/30/200X

P             S    Eliminations & Debit
Assets
Cash
Inventories                                      debit
Other Assets
Investment in S                                  credit
Plant                                            debit
Goodwill                                         debit
Total Assets

Liabilities & Equity
Current Liabilities
Long Term Debt

Common Stock \$5 par
Common Stock \$10 par                             debit
Paid In Capital                                  debit
Retained Earnings                                debit
Total Liabilities & Equity

P CORPORATION
CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 200X
Assets                   Liabilities and Equity
Cash                               Current Liabilities
Inventory                          Long Term debt
Other Assets
Plant                              Common Stock 5 Par
Paid In Capital
Goodwill                           Retained Earnings
Total                             Total

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