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 116,000 52,000 Inventory 140,000 90,000 Investment in Spider 495,000 –0– Computer software 210,000 20,000 Buildings (net) 595,000 130,000 Equipment (net) 308,000 40,000 Client contracts –0– –0– Goodwill –0– –0– Total assets $ 1,900,000 $ 350,000 Accounts payable $ (88,000) $ (25,000) Notes payable (510,000) (60,000) Common stock (380,000) (100,000) Additional paid-in capital (170,000) (25,000) Retained earnings (752,000) (140,000) Total liabilities and equities $(1,900,000) $(350,000) Prepare a consolidated balance sheet for Pratt and Spider as of December 31, 2018.
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 |
116,000 |
52,000 |
|
Inventory |
140,000 |
90,000 |
|
Investment in Spider |
495,000 |
–0– |
|
Computer software |
210,000 |
20,000 |
|
Buildings (net) |
595,000 |
130,000 |
|
Equipment (net) |
308,000 |
40,000 |
|
Client contracts |
–0– |
–0– |
|
|
–0– |
–0– |
|
Total assets |
$ 1,900,000 |
$ 350,000 |
|
Accounts payable |
$ (88,000) |
$ (25,000) |
|
Notes payable |
(510,000) |
(60,000) |
|
Common stock |
(380,000) |
(100,000) |
|
Additional paid-in capital |
(170,000) |
(25,000) |
|
|
(752,000) |
(140,000) |
|
Total liabilities and equities |
$(1,900,000) |
$(350,000) |
Prepare a consolidated
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