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On January 2, 20X8, Primary Corporation acquired 100 percent of Secondary Company's outstanding common stock. In exchange for Secondary's stock, Primary issued bonds payable with a par and fair value of $650,000 directly to the selling stockholders of Secondary. The two companies continued to operate as separate entities subsequent to combination. Immediately prior to the combination, the book values and fair values of the companies' assets and liabilities were as follows: Secondary Company Cash Receivables Allowance for Bad Debts Inventory Land Buildings and Equipment Accumulated Depreciation Patent recome Total Assets Current Payables Bonds Payable Common Stock Additional Paid-In Capital Retained Earnings Total Liabilities and Equity Primary Corporation Book Value $ 12,000 41,000 (2,000) 86,000 55,000 960,000 (411,000) $741,000 $ 38,000 200,000 300,000 100,000 103,000 $ 741,000 Fair Value $ 12,000 39,000 89,000 200,000 650,000 $ 990,000 $ 38,000 210,000 Book Value $9,000 31,000 (1,000) 68,000 50,000 670,000 (220,000) $ 607,000 $ 29,000 100,000 200,000 130,000 148,000 $ 607,000 Fair Value $ 9,000 30,000 72,000 70,000 500,000 40,000 $ 721,000 $ 29,000 90,000 At the date of combination, Secondary owed Primary $6,000 plus accrued interest of $500 on a short-term note. Both companies have properly recorded these amounts. Required: a. Record the business combination on the books of Primary Corporation. b. Prepare the following consolidation entries needed in a worksheet to prepare a consolidated balance sheet immediately following the business combination on January 2, 20X8. c. Prepare and complete a consolidated balance sheet worksheet as of January 2, 20X8, immediately following the business combination. d. Present a consolidated balance sheet for Primary and its subsidiary as of January 2, 20X8.

On January 2, 20X8, Primary Corporation acquired 100 percent of Secondary Company's outstanding common stock. In exchange for Secondary's stock, Primary issued bonds payable with a par and fair value of $650,000 directly to the selling stockholders of Secondary. The two companies continued to operate as separate entities subsequent to combination. Immediately prior to the combination, the book values and fair values of the companies' assets and liabilities were as follows: Secondary Company Cash Receivables Allowance for Bad Debts Inventory Land Buildings and Equipment Accumulated Depreciation Patent recome Total Assets Current Payables Bonds Payable Common Stock Additional Paid-In Capital Retained Earnings Total Liabilities and Equity Primary Corporation Book Value $ 12,000 41,000 (2,000) 86,000 55,000 960,000 (411,000) $741,000 $ 38,000 200,000 300,000 100,000 103,000 $ 741,000 Fair Value $ 12,000 39,000 89,000 200,000 650,000 $ 990,000 $ 38,000 210,000 Book Value $9,000 31,000 (1,000) 68,000 50,000 670,000 (220,000) $ 607,000 $ 29,000 100,000 200,000 130,000 148,000 $ 607,000 Fair Value $ 9,000 30,000 72,000 70,000 500,000 40,000 $ 721,000 $ 29,000 90,000 At the date of combination, Secondary owed Primary $6,000 plus accrued interest of $500 on a short-term note. Both companies have properly recorded these amounts. Required: a. Record the business combination on the books of Primary Corporation. b. Prepare the following consolidation entries needed in a worksheet to prepare a consolidated balance sheet immediately following the business combination on January 2, 20X8. c. Prepare and complete a consolidated balance sheet worksheet as of January 2, 20X8, immediately following the business combination. d. Present a consolidated balance sheet for Primary and its subsidiary as of January 2, 20X8.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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On January 2, 20X8, Primary Corporation acquired 100 percent of Secondary Company's outstanding common stock. In exchange for Secondary's stock, Primary issued bonds payable with a par and fair value of $650,000 directly to the selling stockholders of Secondary. The two companies continued to operate as separate entities subsequent to combination. Immediately prior to the combination, the book values and fair values of the companies' assets and liabilities were as follows: Secondary Company Primary Corporation Book Value Fair Value $ 12,000 $ 12,000 41,000 39,000 (2,000) 86,000 89,000 55,000 200,000 960,000 650,000 (411,000) ETT $ 741,000 $ 990,000 $ 38,000 $ 38,000 200,000 210,000 300,000 100,000 103,000 $ 741,000 Cash Receivables Allowance for Bad Debts Inventory Land Buildings and Equipment Accumulated Depreciation Patent Total Assets Current Payables Bonds Payable Common Stock Additional Paid-In Capital Retained Earnings Book Value $ 9,000 31,000 (1,000) 68,000 50,000 670,000 (220,000) $ 607,000 $ 29,000 100,000 200,000 130,000 148,000 $ 607,000 Fair Value $ 9,000 30,000 72,000 70,000 500,000 40,000 $ 721,000 $ 29,000 90,000 Total Liabilities and Equity At the date of combination, Secondary owed Primary $6,000 plus accrued interest of $500 on a short-term note. Both companies have properly recorded these amounts. Required: a. Record the business combination on the books of Primary Corporation. b. Prepare the following consolidation entries needed in a worksheet to prepare a consolidated balance sheet immediately following the business combination on January 2, 20X8. c. Prepare and complete a consolidated balance sheet worksheet as of January 2, 20X8, immediately following the business combination. d. Present a consolidated balance sheet for Primary and its subsidiary as of January 2, 20X8.
Transcribed Image Text:On January 2, 20X8, Primary Corporation acquired 100 percent of Secondary Company's outstanding common stock. In exchange for Secondary's stock, Primary issued bonds payable with a par and fair value of $650,000 directly to the selling stockholders of Secondary. The two companies continued to operate as separate entities subsequent to combination. Immediately prior to the combination, the book values and fair values of the companies' assets and liabilities were as follows: Secondary Company Primary Corporation Book Value Fair Value $ 12,000 $ 12,000 41,000 39,000 (2,000) 86,000 89,000 55,000 200,000 960,000 650,000 (411,000) ETT $ 741,000 $ 990,000 $ 38,000 $ 38,000 200,000 210,000 300,000 100,000 103,000 $ 741,000 Cash Receivables Allowance for Bad Debts Inventory Land Buildings and Equipment Accumulated Depreciation Patent Total Assets Current Payables Bonds Payable Common Stock Additional Paid-In Capital Retained Earnings Book Value $ 9,000 31,000 (1,000) 68,000 50,000 670,000 (220,000) $ 607,000 $ 29,000 100,000 200,000 130,000 148,000 $ 607,000 Fair Value $ 9,000 30,000 72,000 70,000 500,000 40,000 $ 721,000 $ 29,000 90,000 Total Liabilities and Equity At the date of combination, Secondary owed Primary $6,000 plus accrued interest of $500 on a short-term note. Both companies have properly recorded these amounts. Required: a. Record the business combination on the books of Primary Corporation. b. Prepare the following consolidation entries needed in a worksheet to prepare a consolidated balance sheet immediately following the business combination on January 2, 20X8. c. Prepare and complete a consolidated balance sheet worksheet as of January 2, 20X8, immediately following the business combination. d. Present a consolidated balance sheet for Primary and its subsidiary as of January 2, 20X8.
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