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.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
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.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 4 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education