On January 1, 2024, Presidio Company acquired 100 percent of the outstanding common stock of Mason Company. To acquire these shares, Presidio issued to the owners of Mason $310,000 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. Presidio paid $24,000 to accountants, lawyers, and brokers for assistance in the acquisition and another $9,000 in connection with stock issuance costs. Prior to these transactions, the balance sheets for the two companies were as follows: Cash Items Presidio Company $ 75,000 Mason Company $ 38,800 Receivables Inventory Land Buildings (net) Equipment (net) Accounts payable Long-term liabilities Common stock-$1 par value Common stock-$20 par value Additional paid-in capital Retained earnings, 1/1/24 354,000 380,000 90,000 229,000 246,000 253,000 476,000 274,000 174,000 50,400 (241,000) (41,400) (480,000) (310,000) (110,000) 0 0 (120,000) (360,000) (514,000) 0 (463,800) Note: Parentheses indicate a credit balance. Presidio's appraisal of Mason's fair values deemed three accounts to be undervalued: Inventory by $9,000, Land by $25,800, and Buildings by $32,200. Presidio plans to maintain Mason's separate legal identity and to operate Mason as a wholly owned subsidiary.
On January 1, 2024, Presidio Company acquired 100 percent of the outstanding common stock of Mason Company. To acquire these shares, Presidio issued to the owners of Mason $310,000 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. Presidio paid $24,000 to accountants, lawyers, and brokers for assistance in the acquisition and another $9,000 in connection with stock issuance costs. Prior to these transactions, the balance sheets for the two companies were as follows: Cash Items Presidio Company $ 75,000 Mason Company $ 38,800 Receivables Inventory Land Buildings (net) Equipment (net) Accounts payable Long-term liabilities Common stock-$1 par value Common stock-$20 par value Additional paid-in capital Retained earnings, 1/1/24 354,000 380,000 90,000 229,000 246,000 253,000 476,000 274,000 174,000 50,400 (241,000) (41,400) (480,000) (310,000) (110,000) 0 0 (120,000) (360,000) (514,000) 0 (463,800) Note: Parentheses indicate a credit balance. Presidio's appraisal of Mason's fair values deemed three accounts to be undervalued: Inventory by $9,000, Land by $25,800, and Buildings by $32,200. Presidio plans to maintain Mason's separate legal identity and to operate Mason as a wholly owned subsidiary.
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter13: Investments And Long-term Receivables
Section: Chapter Questions
Problem 8MC
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Transcribed Image Text:On January 1, 2024, Presidio Company acquired 100 percent of the outstanding common stock of Mason Company. To acquire
these shares, Presidio issued to the owners of Mason $310,000 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. Presidio paid $24,000 to accountants, lawyers, and brokers for
assistance in the acquisition and another $9,000 in connection with stock issuance costs.
Prior to these transactions, the balance sheets for the two companies were as follows:
Cash
Items
Presidio
Company
$ 75,000
Mason
Company
$ 38,800
Receivables
Inventory
Land
Buildings (net)
Equipment (net)
Accounts payable
Long-term liabilities
Common stock-$1 par value
Common stock-$20 par value
Additional paid-in capital
Retained earnings, 1/1/24
354,000
380,000
90,000
229,000
246,000
253,000
476,000
274,000
174,000
50,400
(241,000)
(41,400)
(480,000)
(310,000)
(110,000)
0
0
(120,000)
(360,000)
(514,000)
0
(463,800)
Note: Parentheses indicate a credit balance.
Presidio's appraisal of Mason's fair values deemed three accounts to be undervalued: Inventory by $9,000, Land by $25,800, and
Buildings by $32,200. Presidio plans to maintain Mason's separate legal identity and to operate Mason as a wholly owned
subsidiary.
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