Assets Liabilities and Equity Current assets: Current liabilities 90,000 $ 80,000 260,000 Long-term liabilities: Bonds payable. Cash $300,000 50,000 Accounts receivable. Deferred taxes 350,000 Prepaid expenses. . 20,000 $ 360,000 Stockholders' equity: Common stock ($10 par) . Retained earnings . Property, plant, and equipment: $300,000 420,000 Land.. $200,000 720,000 Building (net) 600,000 800,000 Total assets.. $1,160,000 Total liabilities and equity $1,160,000
On January 1, 2021, Knight Corporation purchases all the outstanding shares of Craig Company for $950,000. It has been decided that Craig Company will use push-down accounting principles to account for this transaction. The current balance sheet is stated at historical cost. The following balance sheet is prepared for Craig Company on January 1, 2021: (see attachment)
Knight Corporation receives the following appraisals for Craig Company’s assets and liabilities:
Cash . . . . . . . . . . . . . . . . . . . . . . $ 80,000
Prepaid expenses . . . . . . . . . . . . 20,000
Land. . . . . . . . . . . . . . . . . . . . . . . 250,000
Building (net) . . . . . . . . . . . . . . . . 700,000
Current liabilities . . . . . . . . . . . . . 90,000
Bonds payable . . . . . . . . . . . . . . 280,000
1. Record the investment.
2. Prepare the value analysis schedule and the determination and distribution of excess schedule.
3. Record the adjustments on the books of Craig Company.
4. Prepare the entries that would be made on the consolidated worksheet to eliminate the investment.
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