Pratt Company acquired all of the outstanding shares of Spider, Inc., on December 31, 2021, for $539,650 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 $ 46,000 $ 106,500 Equipment 79,500 60,000 Client contracts 0 124,000 In-process research and development 0 28,750 Notes payable (66,000 ) (71,850 ) At December 31, 2021, the following financial information is available for consolidation (credit balances in parentheses): Pratt Spider Cash $ 15,850 $ 12,500 Receivables 160,500 59,500 Inventory 145,000 84,500 Investment in Spider 539,650 0 Computer software 251,500 46,000 Buildings (net) 513,750 149,000 Equipment (net) 323,000 79,500 Client contracts 0 0 Goodwill 0 0 Total assets $ 1,949,250 $ 431,000 Accounts payable $ (91,500 ) $ (59,000 ) Notes payable (524,750 ) (66,000 ) Common stock (380,000 ) (100,000 ) Additional paid-in capital (170,000 ) (25,000 ) Retained earnings (783,000 ) (181,000 ) Total liabilities and equities $ (1,949,250 ) $ (431,000 ) 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

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Pratt Company acquired all of the outstanding shares of Spider, Inc., on December 31, 2021, for $539,650 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	$	46,000		$	106,500
Equipment		79,500			60,000
Client contracts		0			124,000
In-process research and development		0			28,750
Notes payable		(66,000	)		(71,850	)

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

	Pratt		Spider
Cash	$	15,850		$	12,500
Receivables		160,500			59,500
Inventory		145,000			84,500
Investment in Spider		539,650			0
Computer software		251,500			46,000
Buildings (net)		513,750			149,000
Equipment (net)		323,000			79,500
Client contracts		0			0
Goodwill		0			0
Total assets	$	1,949,250		$	431,000
Accounts payable	$	(91,500	)	$	(59,000	)
Notes payable		(524,750	)		(66,000	)
Common stock		(380,000	)		(100,000	)
Additional paid-in capital		(170,000	)		(25,000	)
Retained earnings		(783,000	)		(181,000	)
Total liabilities and equities	$	(1,949,250	)	$	(431,000	)

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

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