Lucy Cat Incorporated acquires Walter Corporation, by issuing 160,000 shares of $1 par common stock with a market price of $25 per share on the acquisition date and paying $500,000 cash. The assets and liabilities on Walter's balance sheet were valued at fair values except equipment that was undervalued by $1,200,000. There was also an unrecorded patent valued at $160,000, as well as an unrecorded trademark valued at $300,000. In addition, the agreement provided for additional consideration, valued at $240,000, if certain earnings targets were met. The pre-acquisition balance sheets for the two companies at acquisition date are presented below. Hint: Lucy Cat's balance sheet reports amounts immediately before recording the acquisition. Cash Accounts receivable Inventory Property, plant, and equipment Accounts payable Salaries and taxes payable Notes payable Common stock Additional paid-in capital Retained earnings Lucy Cat's Walter Corp. $1,200,000 $1,040,000 1,000,000 540,000 1,016,000 1,100,000 9,200,000 1,426,000 $12,416,000 $4,106,000 $180,000 $150,000 1,800,000 184,000 2,000,000 1,800,000 1,000,000 240,000 3,800,000 426,000 3,636,000 1,306,000 $4,106,000 $12,416,000 Compute consolidated common stock.
Lucy Cat Incorporated acquires Walter Corporation, by issuing 160,000 shares of $1 par common stock with a market price of $25 per share on the acquisition date and paying $500,000 cash. The assets and liabilities on Walter's balance sheet were valued at fair values except equipment that was undervalued by $1,200,000. There was also an unrecorded patent valued at $160,000, as well as an unrecorded trademark valued at $300,000. In addition, the agreement provided for additional consideration, valued at $240,000, if certain earnings targets were met. The pre-acquisition balance sheets for the two companies at acquisition date are presented below. Hint: Lucy Cat's balance sheet reports amounts immediately before recording the acquisition. Cash Accounts receivable Inventory Property, plant, and equipment Accounts payable Salaries and taxes payable Notes payable Common stock Additional paid-in capital Retained earnings Lucy Cat's Walter Corp. $1,200,000 $1,040,000 1,000,000 540,000 1,016,000 1,100,000 9,200,000 1,426,000 $12,416,000 $4,106,000 $180,000 $150,000 1,800,000 184,000 2,000,000 1,800,000 1,000,000 240,000 3,800,000 426,000 3,636,000 1,306,000 $4,106,000 $12,416,000 Compute consolidated common stock.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Lucy Cat Incorporated acquires Walter Corporation, by issuing 160,000 shares of $1 par common stock with a market price of $25 per share on the acquisition date and paying $500,000 cash. The assets and
liabilities on Walter's balance sheet were valued at fair values except equipment that was undervalued by $1,200,000. There was also an unrecorded patent valued at $160,000, as well as an unrecorded trademark
valued at $300,000. In addition, the agreement provided for additional consideration, valued at $240,000, if certain earnings targets were met.
The pre-acquisition balance sheets for the two companies at acquisition date are presented below.
Hint: Lucy Cat's balance sheet reports amounts immediately before recording the acquisition.
Cash
Accounts receivable
Inventory
Property, plant, and equipment
Accounts payable
Salaries and taxes payable
Notes payable
Common stock
Additional paid-in capital
Retained earnings
Lucy Cat's Walter Corp.
$1,200,000 $1,040,000
1,000,000
540,000
1,016,000
1,100,000
9,200,000
1,426,000
$12,416,000 $4,106,000
$180,000
$150,000
1,800,000
184,000
2,000,000 1,800,000
1,000,000
240,000
3,800,000
426,000
3,636,000
1,306,000
$12,416,000
$4,106,000
Compute consolidated common stock.
Select one:
O a. $1,000,000
O
b. $1,240,000
O
c. $1,160,000
d. $1,400,000
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