On January 2, 2016, Revolution Co. issued 150,000 new shares of its $1 par value

Question

On January 2, 2016, Revolution Co. issued 150,000 new shares of its $1 par value common stock valued at $16 a share for all of Founders, Inc.’s outstanding common shares. The fair value and book value of Founders’ identifiable assets and liabilities were the same. Summarized balance sheet information for both companies just before the acquisition on January 2, 2016, is as follows:

Required: Prepare a consolidated balance sheet for Revolution Co. immediately after the business combination.

Revolution Founders Cash $ 250,000 $ 180,000 Inventories $         320,000.00 $         600,000.00 Other Current Assets $         600,000.00 $         400,000.00 Land $         350,000.00 $         500,000.00 Property, Plant & Equipment $     5,100,000.00 $      2,000,000.00 Total Assets $6,620,000   $3,680,000 Accounts Payable $ 800,000 $         350,000.00 Notes Payable $     1,800,000.00 $      1,150,000.00 Common Stock, $1 par $     2,000,000.00 $      1,000,000.00 Additional Paid-in Capital $     1,000,000.00 $         350,000.00 Retained Earnings $     1,020,000.00 $         830,000.00 Total Liabilities & Equities $     6,620,000.00 $      3,680,000.00

Explanation / Answer

Journal:

Beforer acquisition Adjustments Consolidated amount Revolution Founders Debit Credit Consolidated amount Cash    2,50,000    1,80,000                   -                        -                          4,30,000 Inventories    3,20,000    6,00,000                   -                        -                          9,20,000 Other Current Assets    6,00,000    4,00,000                   -                        -                        10,00,000 Land    3,50,000    5,00,000                   -                        -                          8,50,000 Property, Plant & Equipment 51,00,000 20,00,000                   -                        -                        71,00,000 Goodwill                -                  -         2,20,000                      -                          2,20,000    Total Assets 66,20,000 36,80,000                   -                        -                     1,05,20,000 Accounts Payable    8,00,000    3,50,000                   -                        -                        11,50,000 Notes Payable 18,00,000 11,50,000                   -                        -                        29,50,000 Common Stock, $1 par 20,00,000 10,00,000     10,00,000          1,50,000                      21,50,000 Additional Paid-in Capital 10,00,000    3,50,000       3,50,000        22,50,000                      32,50,000 Retained Earnings 10,20,000    8,30,000       8,30,000                      -                        10,20,000 Total Liabilities & Equities 66,20,000 36,80,000                   -                        -                     1,05,20,000

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