Question 5 (8 points) Immediately following an acquisition, the Alpha Company\'s

Question

Question 5 (8 points) Immediately following an acquisition, the Alpha Company's (the parent company) balance sheet includesd Zulu Company, (the wholly owned subsidiary) had cash $75,000, plant assets $145,000, and liabilities subsidiary are also equal to their fair values. Use this information to determine the dollar value of Alpha 000, investment in subsidiary $200,000, plant assets $450,000, and liabilities S150,000. Bravo l balances are normal. There are no other assets or liabilities, and the given values for the Company's 1. Goodwill 2. Total Assets before Consolidation 3. Total Liabilities after Consolidation 4. Total Assets after Consolidation

Explanation / Answer

1. Goodwill = $40,000

  

2. Total Assets before consolidation: of Alpha Ltd :$700,000

3.Total liabilities after consolidation: $150,000

The asset and liabilities position of Alpha company does not change after consolidation. Consolidation is only the process of looking at the financial position of the company with all the assets and liabilities under the control of the company.

4. Total assets after consolidation: $700,000

Investment in subsidiary 200000 Net Assets acquired Cash 75000 Plant assets 145000 220000 Less: Liabilities -60000 Net assets acquired 160000 Goodwill 40000

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