Pratt Company acquired all of Spider, Inc.'s outstanding shares on December 31, 2017, for $495,000 cash. Pratt willoperate Spider as a wholly owned subsidiary with a separate legal and accounting identity. Although many ofSpider's book values approximate fair values, several of its accounts have fair values that differ from book values. Inaddition, Spider has internally developed assets that remain unrecorded on its books. In deriving the acquisitionprice, Pratt assessed Spider's fair and book value differences as follows:Computer softwareEquipmentClient contractsIn-process research and developmentNotes payableCashReceivablesInventoryInvestment in SpiderComputer softwareBuildings (net)Equipment (net)Client contractsGoodwillBookValues00(60,000)At December 31, 2017, the following financial information is available for consolidation:PrattTotal Assets$20,00040,000$36,000116,000140,000495,000210,000595,000308,00000$1,900,000$(88,000)(510,000)(380,000)(170,000)(752,000)Accounts payableNotes payableCommon StockAdditional paid-in capitalRetained EarningsTotal Liabilities & Equities $(1,900,000)FairValues$70,00030,000100,00040,000(65,000)Spider$18,00052,00090,000020,000130,00040,00000$350,000$(25,000)(60,000)(100,000)Required:Prepare a consolidated balance sheet for Pratt and Spider as of December 31, 2017.(25,000)(140,000)$(350,000)

Solution:PrattSpiderDebit $Credit Consolidatedcash$ 36,000$18,000$ 54,000Receivables$ 116,000$…

Pratt Company acquired all of Spider, Inc.'s outstanding shares on December 31, 2017, for $495,000 cash. Pratt wi operate Spider as a wholly owned subsidiary with a separate legal and accounting identity. Although many o Spider's book values approximate fair values, several of its accounts have fair values that differ from book values. I addition, Spider has internally developed assets that remain unrecorded on its books. In deriving the acquisition price, Pratt assessed Spider's fair and book value differences as follows: Computer software Equipment Client contracts In-process research and development Notes payable Book Values Cash Receivables $20,000 40,000 Fair Values $70,000 0 0 (60,000) At December 31, 2017, the following financial information is available for consolidation: Pratt $36,000 116,000 30,000 100,000 40,000 (65,000) Spider $18,000 52,000

Pratt Company acquired all of Spider, Inc.'s outstanding shares on December 31, 2017, for $495,000 cash. Pratt wi operate Spider as a wholly owned subsidiary with a separate legal and accounting identity. Although many o Spider's book values approximate fair values, several of its accounts have fair values that differ from book values. I addition, Spider has internally developed assets that remain unrecorded on its books. In deriving the acquisition price, Pratt assessed Spider's fair and book value differences as follows: Computer software Equipment Client contracts In-process research and development Notes payable Book Values Cash Receivables $20,000 40,000 Fair Values $70,000 0 0 (60,000) At December 31, 2017, the following financial information is available for consolidation: Pratt $36,000 116,000 30,000 100,000 40,000 (65,000) Spider $18,000 52,000

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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Question

Pratt Company acquired all of Spider, Inc.'s outstanding shares on December 31, 2017, for $495,000 cash. Pratt will
operate Spider as a wholly owned subsidiary with a separate legal and accounting identity. Although many of
Spider's book values approximate fair values, several of its accounts have fair values that differ from book values. In
addition, Spider has internally developed assets that remain unrecorded on its books. In deriving the acquisition
price, Pratt assessed Spider's fair and book value differences as follows:
Computer software
Equipment
Client contracts
In-process research and development
Notes payable
Cash
Receivables
Inventory
Investment in Spider
Computer software
Buildings (net)
Equipment (net)
Client contracts
Goodwill
Book
Values
0
0
(60,000)
At December 31, 2017, the following financial information is available for consolidation:
Pratt
Total Assets
$20,000
40,000
$36,000
116,000
140,000
495,000
210,000
595,000
308,000
0
0
$1,900,000
$(88,000)
(510,000)
(380,000)
(170,000)
(752,000)
Accounts payable
Notes payable
Common Stock
Additional paid-in capital
Retained Earnings
Total Liabilities & Equities $(1,900,000)
Fair
Values
$70,000
30,000
100,000
40,000
(65,000)
Spider
$18,000
52,000
90,000
0
20,000
130,000
40,000
0
0
$350,000
$(25,000)
(60,000)
(100,000)
Required:
Prepare a consolidated balance sheet for Pratt and Spider as of December 31, 2017.
(25,000)
(140,000)
$(350,000)

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