(Note: Parentheses indicate a credit balance. Wisconsin also paid $38,700 to a b
ID: 2487876 • Letter: #
Question
(Note: Parentheses indicate a credit balance.
Wisconsin also paid $38,700 to a broker for arranging the transaction. In addition, Wisconsin paid $45,800 in stock issuance costs. Badger's equipment was actually worth $701,250, but its patented technology was valued at only $303,900.
What are the consolidated balances for the following accounts? (Input all amounts as positive values.)
What are the consolidated balances for the following accounts? (Input all amounts as positive values.)
Accounts A. Net Income B. Retained earnings 01/01/15 C. Patented technology D. Goodwill E. Liabilities F. Common Stock G. Additional paid in capital
Explanation / Answer
The consolidated balances are calculated as follows:
1) Net Income = Net Income of Wisconsin - Commission Paid for Professional Services = 279,000 - 38,700 = $240,300
The net income of subsidiary prior to acquisition has no relevance and will not form part of consolidated net income.
_______
2) Retained Earnings = $891,000 (as given in the question)
The retained earnings balance of subsidiary to acquisition has no relevance and will not form part of consolidated balance of retained earnings.
_______
3) Patented Technology = Book Value of Parent Company's Patent + Fair Value of Subsidiary's Patent = 922,000 + 303,900 = $1,225,900
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4) The value of Goodwill is calculated with the use of following table:
_______
5) The consolidated balance of liabilities is calculated with the use of following table:
_______
6) The consolidated balance of common stock is calculated with the use of following table:
_______
7) The consolidated balance of additional paid in capital is calculated as follows:
_______
Tabular Representation:
Consideration transferred (fair value) for Badger Stock (15,200*40 + 444,550) 1,052,550 Less Book value of Badger as on 6/30 (200,000 + 270,000 + 453,000) 923,000 Fair value in excess of Book value 129,550 Add Excess fair value (Equipment Undervalued) [701,250 – 600,000] 101,250 Less Excess fair value (Patented Technology Overvalued) [327,000 - 303,900] 23,100 Consolidate Balance of Goodwill $207,700Related Questions
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