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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Pratt Company acquired all of Spider, Inc.’s outstanding shares on December 31, 2018, 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: Book Values Fair Values Computer software $ 20,000 $ 70,000 Equipment 40,000 30,000 Client contracts –0– 100,000 In-process research and development –0– 40,000 Notes payable (60,000) (65,000) At December 31, 2018, the following financial information is available for consolidation: Pratt Spider Cash $ 36,000 $ 18,000 Receivables…
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