Problem 2-29 (LO 2-4, 2-5, 2-7, 2-8) Pratt Company acquired all of Spider, Inc\'

Question

Problem 2-29 (LO 2-4, 2-5, 2-7, 2-8) Pratt Company acquired all of Spider, Inc's outstanding shares on December 31, 2018, for $531,550 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 derlving the acquisition price, Pratt assessed Spider's fair and book value differences as follows: Book Values Fair Values $ 57,700 116,950 Computer software Equipment Ciient contracts 40,500 25,500 109,000 39,000 (105, 200) In-process research and development Notes payable (95,500) At December 31, 2018, the following financial information is available for consolidation: Pratt Spider Cash Receivables Inventory Investment in Spider Computer software Buildings (net) Equipment (net) Client contracts Goodwil1 15,000 38,300 63,500 116,000 122,000 160,000 531,550 217,000 611,250 321,000 57,700 146,000 40,500 Total assets 1,977,800 462,000 nts payable Notes payable Common stock Additional paid-in capital Retained earnings $(92,300 (57,500) (95, 500) (380, 000) (100, 000) (25, 000) (812,0001 (184,0001 $(1,977,800) (462,000) (523, 500) (170, 000) Total 1iabilities and equities Prepare a consolidated balance sheet for Pratt and Spider as of December 31, 2018. PRATT COMPANY AND SUBSIDIA Consolidated Balance Sheet December 31, 2018 Assets Liabilities and Stockholders' Equity

Explanation / Answer

Particulars Pratt Spider Adjustments Consolidated amount Cash                         15,000                       38,300                            -                                         53,300 Receivables                       122,000                       63,500                            -                                      185,500 Inventory                       160,000                     116,000                            -                                      276,000 Investment in spider                       531,550                                -                (531,550)                                                -   Computer software                       217,000                       57,700                   59,250                                    333,950 Buildings(net)                       611,250                     146,000                            -                                      757,250 Equipment (net)                       321,000                       40,500                 (15,000)                                    346,500 Client contracts                                   -                                  -                   109,000                                    109,000 In process R and D                                   -                                  -                     39,000                                       39,000 Goodwill                                   -                                  -                     40,000                                       40,000 Total assets                   1,977,800                     462,000              (299,300)                                 2,140,500 Accounts payable                       (92,300)                     (57,500)                            -                                    (149,800) Notes payable                     (523,500)                     (95,500)                   (9,700)                                  (628,700) Common stock                     (380,000)                  (100,000)                 100,000                                  (380,000) Additional paid in capital                     (170,000)                     (25,000)                   25,000                                  (170,000) Retained earnings                     (812,000)                  (184,000)                 184,000                                  (812,000) Total liabilities and equities                 (1,977,800)                  (462,000)                 299,300                              (2,140,500)

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