Pratt Company acquired all of Spider, Inc.’s outstanding shares on December 31,
ID: 2425080 • Letter: P
Question
Pratt Company acquired all of Spider, Inc.’s outstanding shares on December 31, 2015, for $515,300 cash. Pratt will operate Spider as a wholly owned subsidiary with a separate legal 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 Spider’s fair and book value differences as follows:
Note: Parentheses indicate a credit balance.
Prepare a consolidated balance sheet for Pratt and Spider as of December 31, 2015.
Pratt Company acquired all of Spider, Inc.’s outstanding shares on December 31, 2015, for $515,300 cash. Pratt will operate Spider as a wholly owned subsidiary with a separate legal 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 Spider’s fair and book value differences as follows:
Explanation / Answer
Answer:
Consideration transferred at fair value...................... $51,5300
Book value..................................................................... 307500
Excess fair over book value......................................... 207800
Allocation of excess fair value to
specific assets and liabilities:
to computer software............................................. $36,000
to equipment........................................................... (14,900)
to client contracts.................................................... 112,400
to IPR&D................................................................ 34,750
to notes payable...................................................... (8450) 159,800
Goodwill........................................................................ $48,000
Particulars Pratt Spider Debit Credit Consolidated Cash 31,950 17,100 49,050 Receivables 141,000 62,900 203,900 Inventory 183,500 106,000 289,500 Investment in Spider 515,300 0 (S) 307500 0 (A) 207800 0 Computer software 213,000 40,000 (A) 36,000 289,000 Buildings (net) 513,000 134,000 647,000 Equipment (net) 328,000 86,000 (A) 14900 399,100 Client contracts 0 0 (A) 112,400 112,400 R&D asset 0 0 (A) 34,750 34,750 Goodwill 0 0 (A) 48,000 48,000 Total assets 1,925,750 446,000 2,072,700 Accounts payable -98,500 -43,500 -142,000 Notes payable -519,250 -95,000 (A) 8450 -622,700 Common stock -380,000 -100,000 (S)100,000 -380,000 Additional paid- in capital -170,000 -25,000 (S) 25,000 -170,000 Retained earnings -758,000 -182,500 (S)182500 -758,000 Total liabilities and equities -1,925,750 -446,000 -2,072,700Related Questions
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