View previous attemptCheck myOn January 1, 2024, Presidio Company acquired 100 percent of the outstanding common stock of Mason Company. To acquire theseshares, Presidio issued to the owners of Mason $295,000 in long-term liabilities and 20,000 shares of common stock having a parvalue of $1 per share but a fair value of $10 per share. Presidio paid $26,500 to accountants, lawyers, and brokers for assistance in theacquisition and another $11,500 in connection with stock issuance costs.Prior to these transactions, the balance sheets for the two companies were as follows:ItemsPresidioCompanyCash$ 63,000MasonCompany$ 29,200LandReceivablesInventoryBuildings (net)306,000189,000426,000168,000207,000213,000484,000237,000Equipment (net)167,00073,800Accounts payableLong-term liabilities(221,000)(62,700)(444,000)(295,000)Common stock-$1 par value(110,000)05Common stock-$20 par value0(120,000)Additional paid-in capitalRetained earnings, 1/1/24(360,000)(51,000)0(432,300)Note: Parentheses indicate a credit balance.Presidio's appraisal of Mason's fair values deemed three accounts to be undervalued: Inventory by $7,550, Land by $17,600, andBuildings by $25,400. Presidio plans to maintain Mason's separate legal identity and to operate Mason as a wholly owned subsidiary.Required:a. Prepare Presidio's journal entries to record its acquisition of Mason, related professional fees paid, and stock acquisition costs.b. Separately determine each individual amount that Presidio Company would report in its consolidated balance sheet following theacquisition of Mason. Include in Presidio's retained earnings any adjustments to income accounts from part (a).c. To verify the answers found in part (b), adjust Presidio's column of accounts for the journal entries in part (a) and then prepare aworksheet to consolidate the balance sheets of these two companies at the acquisition date.

ConsolidationThe combination of one or two elements is called consolidation. When a company acquires…

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 $295,000 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 $26,500 to accountants, lawyers, and brokers for assistance in the acquisition and another $11,500 in connection with stock issuance costs. Prior to these transactions, the balance sheets for the two companies were as follows: Items Cash Receivables Inventory Land Buildings (net) Presidio Company $ 63,000 306,000 Mason Company $ 29,200 189,000 426,000 168,000 207,000 213,000 484,000 237,000 167,000 73,800 (221,000) (62,700) (444,000) (295,000) (110,000) 0 (120,000) (432,300) 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 (360,000) (51,000) Note: Parentheses indicate a credit balance. Presidio's appraisal of Mason's fair values deemed three accounts to be undervalued: Inventory by $7,550, Land by $17,600, and Buildings by $25,400. Presidio plans to maintain Mason's separate legal identity and to operate Mason as a wholly owned subsidiary. Required: a. Prepare Presidio's journal entries to record its acquisition of Mason, related professional fees paid, and stock acquisition costs. b. Separately determine each individual amount that Presidio Company would report in its consolidated balance sheet following the acquisition of Mason. Include in Presidio's retained earnings any adjustments to income accounts from part (a). c. To verify the answers found in part (b), adjust Presidio's column of accounts for the journal entries in part (a) and then prepare a worksheet to consolidate the balance sheets of these two companies at the acquisition date.

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q