Determining ending balances of accounts on the consolidated balance sheet Assume

Question

Determining ending balances of accounts on the consolidated balance sheet Assume that the parent company acquires its subsidiary by exchanging 1 10,000 shares of its Common Stock with a market value on the acquisition date of $40 per share, for all of the outstanding voting shares of the investee. In its analysis of the investee company, the parent values all of the subsidiary's assets and liabilities at an amount equaling their book values except for a building that it feels is undervalued by 1,000,000, an unrecorded License Agreement that the parent values at $500,000, and an unrecorded Customer List owned by the subsidiary that the parent values at $200,000. Any further discrepancy between the purchase price and the book value of the subsidiary's Stockholders' Equity is attributed to expected synergies to be realized by the consolidated company as a result of the acquisition. a. Given the following acquisition-date balance sheets of the parent and subsidiary, at what amounts will each of the following be reported on the consolidated balance sheet? Balance Sheet Parent Subsidiary Assets $1,821,000 $403,200 768,000 835,200 1,164,000 1,072,800 Accounts receivable Equity investment 4,400,000 Property, plant and equipment(PPE, net $99,.200 1.984,800 $13,752,200 $4,296,000 Liabilities and stockholders' equity Accounts payable Accrued liabilities Long-term liabilities Common stock APIC Retained earnings 376,200 S254,000 441,600 4,000 2,000,000 ,200,000 440,000 240,000 7,480,000 300,000 3,014400 ,860,000 $13,752,200 $,296,000 1. Accounts Receivable $ 2. Equity Investment 3. PPE, net 4. Goodwill 5. Common Stock 6. APIC 7. Retained Earnings S

Explanation / Answer

Consolidated Amount in Group Balance sheet ( in $) Accounts Receivable (768000+835200+200000)        18,03,200 Equity Investment                    - PPE (5599200+1984800+1000000)        85,84,000 Goodwill           3,52,000 Common Stock           4,40,000 APIC        74,80,000 Retained Earnings        30,14,400 INTANGIBLE ASSETS Licence Agreement           5,00,000 Goodwill           3,00,000 Customer list is not an intangible asset Note: The figures are given as on acquisition date. Accordingly, retained earnings of subsidiary is not added since only post acquistions earnings are consolidated. Calculation of Goodwill Fair Value of consideration - Net Assets Acquired (110000*$40)-4100000 = 300000 Net Assets= Book value of assets + 10,00,000 added in PPE + 5,0,000 added as an intangible + 200,000 unrecorded receivables - Accounts payable + Accrued Liabilities + Long term liabilities

Related Questions

Navigate

• Browse (All)
• Browse D
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.