Part 2: Problem Solving - Journal Using the data in the Option 1 Spreadsheet (li

Question

Part 2: Problem Solving - Journal

Using the data in the Option 1 Spreadsheet (linked at the bottom of the page), perform the accounting required for the acquisition of Little, Inc. by Big, Inc. Within the worksheet, you are to:

Complete the consolidation worksheet

Prepare the consolidated balance sheet in good form

Assume that Big Company decides to acquire 100% of Little Company for $200,000. Prepare the consolidated balance sheet and any supporting worksheets. Big Company Balance Sheet Assets, Liabilities & Equities Book Value Cash $500,000 AR $10,000 Inventory $50,000 Land $40,000 PP&E $400,000 Accumulated Depreciation -$150,000 Patent $0     Total Assets $850,000 AP $110,000 Common Stock $395,000 Additional Paid In Capital $300,000 Retained Earnings $45,000     Total Liabilities & Equity $850,000 Little Company Balance Sheet Assets, Liabilities & Equities Book Value Cash $35,000 AR $10,000 Inventory $65,000 Land $40,000 PP&E $40,000 Accumulated Depreciation -$5,000 Patent $0     Total Assets $185,000 AP $25,000 Common Stock $25,000 Additional Paid In Capital $35,000 Retained Earnings $100,000     Total Liabilities & Equity $185,000 Assume that Fair Value of all noncash assets are 25% greater than book value Assume that Big Company decides to acquire 100% of Little Company for $200,000. Prepare the consolidated balance sheet and any supporting worksheets. Big Company Worksheet Assets, Liabilities & Equities Cash AR Inventory Land PP&E Accumulated Depreciation Goodwill Patent     Total Assets AP Common Stock Additional Paid In Capital Retained Earnings     Total Liabilities & Equity Prepare the Consolidated Balance Sheet in the area below Big Company Balance Sheet Assets, Liabilities & Equities Cash AR Inventory Land PP&E Accumulated Depreciation Patent     Total Assets AP Common Stock Additional Paid In Capital Retained Earnings     Total Liabilities & Equity

Explanation / Answer

Calculation of goodwill/capital reserve at the acquisiton of Little Co. is as under: Cash $          35,000 AR $          10,000 Inventory $          65,000 Land (+25%) $          50,000 PP&E (125%) $          50,000 Accum.Dep. $          (5,000) Less: AP $        (25,000) Consideration $        180,000 Goodwill=Book value of assets and liabilities-Consideration Book value of assets Cash $          35,000 AR $          10,000 Inventory $          65,000 Land $          40,000 PP&E $          40,000 Accum.Dep. $          (5,000) Less: AP $        (25,000) Book value of assets $        160,000 Good will: Consideration $        180,000 Less:Book value of assets $     (160,000) Goodwill $          20,000 Big Company Consolidated balance sheet Cash $        355,000 AR $          20,000 Inventory $        115,000 Land $          80,000 PP&E $        440,000 Less: Acc.Dep $     (155,000) Goodwill $          20,000 Patent $                   -   Total Assets $        875,000 AP $        135,000 Common stock $        395,000 Additional paid in capital $        300,000 Retained earnings $          45,000 Total Liabiliites and Equity $        875,000 Cash=$500,000+$35,000-$180,000=$355,000 All assets and liabilities in the consolidated balance sheet are computed by adding book values of big company and book values of Little company.

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

---

---

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