Pratt Company acquired all of the outstanding shares of Spider, Inc., on December 31, 2021, for $488,900 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 $ 28,000 $ 68,750 Equipment 69,500 59,400 Client contracts 0 112,000 In-process research and development 0 24,500 Notes payable (72,500 ) (79,000 ) At December 31, 2021, the following financial information is available for consolidation (credit balances in parentheses): Pratt Spider Cash $ 18,700 $ 16,000 Receivables 118,500 57,500 Inventory 158,000 87,000 Investment in Spider 488,900 0 Computer software 230,000 28,000 Buildings (net) 612,750 136,000 Equipment (net) 400,000 69,500 Client contracts 0 0 Goodwill 0 0 Total assets $ 2,026,850 $ 394,000 Accounts payable $ (94,600 ) $ (34,000 ) Notes payable (532,250 ) (72,500 ) Common stock (380,000 ) (100,000 ) Additional paid-in capital (170,000 ) (25,000 ) Retained earnings (850,000 ) (162,500 ) Total liabilities and equities $ (2,026,850 ) $ (394,000 ) Prepare a consolidated balance sheet for Pratt and Spider as of December 31, 2021.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Question

Pratt Company acquired all of the outstanding shares of Spider, Inc., on December 31, 2021, for $488,900 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	$	28,000		$	68,750
Equipment		69,500			59,400
Client contracts		0			112,000
In-process research and development		0			24,500
Notes payable		(72,500	)		(79,000	)

At December 31, 2021, the following financial information is available for consolidation (credit balances in parentheses):

	Pratt		Spider
Cash	$	18,700		$	16,000
Receivables		118,500			57,500
Inventory		158,000			87,000
Investment in Spider		488,900			0
Computer software		230,000			28,000
Buildings (net)		612,750			136,000
Equipment (net)		400,000			69,500
Client contracts		0			0
Goodwill		0			0
Total assets	$	2,026,850		$	394,000
Accounts payable	$	(94,600	)	$	(34,000	)
Notes payable		(532,250	)		(72,500	)
Common stock		(380,000	)		(100,000	)
Additional paid-in capital		(170,000	)		(25,000	)
Retained earnings		(850,000	)		(162,500	)
Total liabilities and equities	$	(2,026,850	)	$	(394,000	)

Prepare a consolidated balance sheet for Pratt and Spider as of December 31, 2021.

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 2 steps with 1 images

SEE SOLUTION Check out a sample Q&A here

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.

Similar questions