Calculate the goodwill for this acquisition. Prepare the eliminating entries to consolidate the balance sheets of Marshall and Tucker at the date of acquisition. Prepare a worksheet to consolidate the balance sheets of these two companies as of January 1, 2018.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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On January 1, 2018, Marshall Company acquired 100 percent of the outstanding common stock of Tucker Company. To acquire these shares, Marshall issued $200,000 in long-term liabilities and 20,000 shares of common stock having a par value of $1 per share but a fair value of $20 per share. Marshall paid $30,000 to accountants, lawyers, and brokers for assistance in the acquisition and another $12,000 in connection with stock issuance costs.

Prior to these transactions, the balance sheets for the two companies were as follows:

                                      Marshall Company Book Value            Tucker Company Book Value

Cash                                   $       60,000                                                 $ 20,000

Receivables                               270,000                                                   90,000  

Inventory                                   360,000                                                 140,000

Land                                          200,000                                                 180,000

Buildings (net)                          420,000                                                 210,000

Equipment (net)                        160,000                                                   50,000  

Goodwill                                         -                                                         10,000

Accounts payable                    (150,000)                                                (40,000)

Long-term liabilities                (430,000)                                              (200,000)

Common stock—$1 par value (110,000)                                                     -

Common stock—$20 par value       -                                                    (120,000)

Additional paid-in capital        (360,000)                                                     -   

Retained earnings, 1/1/18        (420,000)                                              (340,000)

 

In Marshall’s appraisal of Tucker, it deemed three accounts to be undervalued on the subsidiary’s books: Inventory by $5,000, Land by $20,000, and Buildings by $30,000. Marshall plans to maintain Tucker’s separate legal identity and to operate Tucker as a wholly owned subsidiary.

 

Required:

  1. Calculate the goodwill for this acquisition.
  2. Prepare the eliminating entries to consolidate the balance sheets of Marshall and Tucker at the date of acquisition.
  3. Prepare a worksheet to consolidate the balance sheets of these two companies as of January 1, 2018.

 

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