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Concept explainers
a.
Determine the amounts that Company M would report in its post-acquisition
a.
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Explanation of Solution
The amounts that Company M would report in its post-acquisition balance sheet are as follows:
Particulars | Company C | Company K | |
Cash | $ 18,000 (1) | $ 20,000 | |
Receivables | $ 270,000 | $ 90,000 | |
Inventory | $ 360,000 | $ 140,000 | |
Land | $ 200,000 | $ 180,000 | |
Buildings (net) | $ 420,000 | $ 220,000 | |
Equipment (net) | $ 160,000 | $ 50,000 | |
Investment in Company T | $ 515,000 (2) | ||
Total assets | $ 1,943,000 | $ 700,000 | |
Accounts payable | $ (150,000) | $ (40,000) | |
Long-term liabilities | $ (630,000) | $ (200,000) | |
Common stock | $ (130,000) | $ (120,000) | |
Additional paid-in capital | $ (528,000) (3) | $ - | |
$ (505,000) (4) | $ (340,000) | ||
Total liabilities and equity | $ (1,943,000) | $ (700,000) |
Table: (1)
Working note:
Calculation of cash:
Calculation of investment:
Calculation of Additional paid-in Capital:
Calculation of Retained earnings, 1/1/18:
b.
Prepare a worksheet to consolidate the balance sheets of these two companies as of January 1, 2018.
b.
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Explanation of Solution
The worksheet to consolidate the balance sheets of these two companies as of January 1, 2018 is as follows:
Particulars | Company C | Company K | Consolidated Entries | Consolidated Balances | ||
Cash | $ 18,000 | $ 20,000 | $ 38,000 | |||
Receivables | $ 270,000 | $ 90,000 | $ 360,000 | |||
Inventory | $ 360,000 | $ 140,000 | $ 5,000 | $ 505,000 | ||
Land | $ 200,000 | $ 180,000 | $ 20,000 | $ 400,000 | ||
Buildings (net) | $ 420,000 | $ 220,000 | $ 30,000 | $ 670,000 | ||
Equipment (net) | $ 160,000 | $ 50,000 | $ 210,000 | |||
Investment in Company T | $ 515,000 | $ 460,000 | ||||
$ 55,000 | $ - | |||||
Total assets | $ 1,943,000 | $ 700,000 | $ 2,183,000 | |||
Accounts payable | $ (150,000) | $ (40,000) | $ (190,000) | |||
Long-term liabilities | $ (630,000) | $ (200,000) | $ (830,000) | |||
Common stock | $ (130,000) | $ (120,000) | $ 120,000 | $ (130,000) | ||
Additional paid-in capital | $ (528,000) | $ - | $ (528,000) | |||
Retained earnings, 1/1/18 | $ (505,000) | $ (340,000) | $ 340,000 | $ (505,000) | ||
Total liabilities and equity | $ (1,943,000) | $ (700,000) | $ 515,000 | $ 515,000 | $ (2,183,000) |
Table: (2)
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