On January 1, 2021, Marshall Company acquired 100 percent of the outstanding common stock of Tucker Company. To acquire these shares, Marshall issued $313,000 in long-term liabilities and 20,000 shares of common stock having a par value of $1 per share but a fair value of $10 per share. Marshall paid $23,000 to accountants, lawyers, and brokers for assistance in the acquisition and another $8,000 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 $ 86,700 $ 33,200 Receivables 298,000 125,000 Inventory 414,000 238,000 Land 206,000 212,000 Buildings (net) 463,000 276,000 Equipment (net) 223,000 79,500 Accounts payable (195,000 ) (60,900 ) Long-term liabilities (500,000 ) (313,000 ) Common stock—$1 par value (110,000 ) Common stock—$20 par value (120,000 ) Additional paid-in capital (360,000 ) 0 Retained earnings, 1/1/21 (525,700 ) (469,800 ) Note: Parentheses indicate a credit balance. In Marshall’s appraisal of Tucker, it deemed three accounts to be undervalued on the subsidiary’s books: Inventory by $7,650, Land by $28,800, and Buildings by $37,000. Marshall plans to maintain Tucker’s separate legal identity and to operate Tucker as a wholly owned subsidiary. Determine the amounts that Marshall Company would report in its postacquisition consolidated balance sheet. In preparing the postacquisition balance sheet, any required adjustments to income accounts from the acquisition should be closed to Marshall’s retained earnings. Other accounts will also need to be added or adjusted to reflect the journal entries Marshall prepared in recording the acquisition. To verify the answers found in part (a), prepare a worksheet to consolidate the balance sheets of these two companies as of January 1, 2021.

On January 1, 2021, Marshall Company acquired 100 percent of the outstanding common stock of Tucker Company. To acquire these shares, Marshall issued $313,000 in long-term liabilities and 20,000 shares of common stock having a par value of $1 per share but a fair value of $10 per share. Marshall paid $23,000 to accountants, lawyers, and brokers for assistance in the acquisition and another $8,000 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 $ 86,700 $ 33,200 Receivables 298,000 125,000 Inventory 414,000 238,000 Land 206,000 212,000 Buildings (net) 463,000 276,000 Equipment (net) 223,000 79,500 Accounts payable (195,000 ) (60,900 ) Long-term liabilities (500,000 ) (313,000 ) Common stock—$1 par value (110,000 ) Common stock—$20 par value (120,000 ) Additional paid-in capital (360,000 ) 0 Retained earnings, 1/1/21 (525,700 ) (469,800 ) Note: Parentheses indicate a credit balance. In Marshall’s appraisal of Tucker, it deemed three accounts to be undervalued on the subsidiary’s books: Inventory by $7,650, Land by $28,800, and Buildings by $37,000. Marshall plans to maintain Tucker’s separate legal identity and to operate Tucker as a wholly owned subsidiary. Determine the amounts that Marshall Company would report in its postacquisition consolidated balance sheet. In preparing the postacquisition balance sheet, any required adjustments to income accounts from the acquisition should be closed to Marshall’s retained earnings. Other accounts will also need to be added or adjusted to reflect the journal entries Marshall prepared in recording the acquisition. To verify the answers found in part (a), prepare a worksheet to consolidate the balance sheets of these two companies as of January 1, 2021.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Question

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

	Marshall Company Book Value		Tucker Company Book Value
Cash	$	86,700		$	33,200
Receivables		298,000			125,000
Inventory		414,000			238,000
Land		206,000			212,000
Buildings (net)		463,000			276,000
Equipment (net)		223,000			79,500
Accounts payable		(195,000	)		(60,900	)
Long-term liabilities		(500,000	)		(313,000	)
Common stock—$1 par value		(110,000	)
Common stock—$20 par value					(120,000	)
Additional paid-in capital		(360,000	)		0
Retained earnings, 1/1/21		(525,700	)		(469,800	)

Note: Parentheses indicate a credit balance.

In Marshall’s appraisal of Tucker, it deemed three accounts to be undervalued on the subsidiary’s books: Inventory by $7,650, Land by $28,800, and Buildings by $37,000. Marshall plans to maintain Tucker’s separate legal identity and to operate Tucker as a wholly owned subsidiary.

Determine the amounts that Marshall Company would report in its postacquisition consolidated balance sheet. In preparing the postacquisition balance sheet, any required adjustments to income accounts from the acquisition should be closed to Marshall’s retained earnings. Other accounts will also need to be added or adjusted to reflect the journal entries Marshall prepared in recording the acquisition.
To verify the answers found in part (a), prepare a worksheet to consolidate the balance sheets of these two companies as of January 1, 2021.

MARSHALL COMPANY AND CONSOLIDATED SUBSIDIARY
Worksheet
January 1, 2021
Marshall
Tucker
Consolidation Entries Consolidated
Accounts
Company
Company
Totals
Debit
Credit
Cash
Receivables
Inventory
Land
Buildings (net)
Equipment (net)
Investment in Tucker
Total assets
$
Accounts payable
Long-term liabilities
Common stock
Additional paid-in capital
Retained earnings, 1/1/21
Total liabilities and equities
0 $
0 $
0 $
%24
%24

Required A
Required B
Determine the amounts that Marshall Company would report in its postacquisition consolidated balance sheet. In preparing
the postacquisition balance sheet, any required adjustments to income accounts from the acquisition should be closed to
Marshall's retained earnings. Other accounts will also need to be added or adjusted to reflect the journal entries Marshall
prepared in recording the acquisition. (Input all amounts as positive values.)
Show less A
Consolidated
Totals
Cash
Receivables
Inventory
Land
Buildings (net)
Equipment (net)
Total assets
$
Accounts payable
Long-term liabilities
Common stock
Additional paid-in capital
Retained earnings
Total liabilities and equities
$

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here