On May 1, Burns Corporation acquired 100 percent of the outstanding ownership sh
ID: 2568580 • Letter: O
Question
On May 1, Burns Corporation acquired 100 percent of the outstanding ownership shares of Quigley Corporation in exchange for $710,000 cash. At the acquisition date, Quigley’s book and fair values were as follows:
Burns directs Quigley to seek additional financing for expansion through a new long-term debt issue. Consequently, Quigley will issue a set of financial statements separate from that of its new parent to support its request for debt and accompanying regulatory filings. Quigley elects to apply pushdown accounting in order to show recent fair valuations for its assets.
Prepare a separate acquisition-date balance sheet for Quigley Corporation using pushdown accounting.
Book Value Fair Value Cash $ 95,000 $ 95,000 Receivables 200,000 200,000 Inventory 210,000 260,000 Land 130,000 110,000 Building and equipment (net) 270,000 330,000 Patented technology 0 220,000 Total assets $ 905,000 $ 1,215,000 Accounts payable $ 120,000 $ 120,000 Long-term liabilities 510,000 510,000 Common stock ($5 par value) 210,000 Additional paid-in capital 90,000 Retained earnings (25,000 ) Total liabilities and stockholders equity $ 905,000Explanation / Answer
Quigley Corporation Balance Sheet
May 1
Cash $ 95,000
Receivables 200,000
Inventory 260,000
Land 110,000
Building and equipment (net) 330,000
Patented technology 220,000
Goodwill 125,000
Total assets $ 1,340,000
Accounts payable $ 120,000
Long-term liabilities 510,000
Common stock—5 par value 210,000
Additional paid-in capital 90,000
APIC from pushown accounting 410,000
Retained earnings, 1/1 -0-
Total liabilities and stockholders' equity $1,340,000
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