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Find the consolidated balances for the following accounts.
a. Net income
b.
c. Patented technology
d.
e. Liabilities
f. Common stock
g. Additional paid-in capital.
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Answer to Problem 24P
Accounts | Consolidated value | |
a. | Net income | $ 210,000 |
b. | Retained earnings, 1/1/15 | $ 800,000 |
c. | Patented technology | $ 1,180,000 |
d. | Goodwill | $ 50,000 |
e. | Liabilities | $ 1,210,000 |
f. | Common stock | $ 510,000 |
g. | Additional paid-in capital | $ 680,000 |
Table: (1)
Explanation of Solution
The consolidated balances are as follows:
Accounts | Book values in Company P | Fair values in Company S | Consolidated value | |
a. | Net income (1) | $ 210,000 | ||
b. | Retained earnings, 1/1/15 | $ 800,000 | $ 800,000 | |
c. | Patented technology | $ 900,000 | $ 280,000 | $ 1,180,000 |
d. | Goodwill (2) | $ 50,000 | ||
e. | Liabilities (3) | $ 500,000 | $ 410,000 | $ 1,210,000 |
f. | Common stock (4) | $ 510,000 | ||
g. | Additional paid-in capital (5) | $ 680,000 |
Table: (2)
Working note:
Computation of net income:
Computation of Goodwill:
Particulars | Amount | Amount |
Consideration paid | $ 900,000 | |
Cash | $ 110,000 | |
Receivables | $ 170,000 | |
Patented Technology (net) | $ 280,000 | |
Equipment (net) | $ 700,000 | |
Liabilities | $ (410,000) | |
Fair value of net identifiable assets | $ 850,000 | |
Goodwill | $ 80,000 (2) |
Table: (3)
Computation of liabilities:
Computation of Common Stock:
Computation of Additional paid-in capital:
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