chapter 02 xlsol

7/31/2019 Chapter 02 XLSol

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Student Name: InstructorClass: McGraw-Hill/Irwin

Problem 02-14

Part a. Marshall and Tucker Consolidated Balances

Marshall's acquisition of Tucker represents a bargain purchase

because the fair value of the net assets acquired exceeds thefair value of the consideration transaction as follows:

Fair value of consideration transferred 400,000$Fair value of net assets acquired 515,000Gain on bargain purchase 115,000$

Correct!

Record 3 transactions that occurred to create the

business combination:

MARSHALL COMPANY

General Journal

Account Debit CreditInvestment in Tucker 515,000

Long-Term Liabilities 200,000

Common Stock (par value) 20,000Additional Paid-In Capital 180,000Gain on Bargain Purchase 115,000

(To record liabilities and stock isued for Tucker acquilition at fair value)

Combination Expenses 30,000Cash 30,000

(To record payment of combination fees)

Additional Paid-In Capital 12,000

Cash 12,000

(To record payment of stock issuance costs)

Marshall's trial balance is adjusted for the transactions

(as shown in the worksheet that follows).

Consideration transferred at fair value 400,000$Book value (assets minus liabilities 460,000

or stockholders' equity)Book value in excess of consideration (60,000)

Allocation to specific accounts based onfair value:Inventory 5,000Land 20,000Buildings 30,000

Bargain purchase (fair market value (115,000)$

in excess of purchase price) Correct!


2/12


Problem 02-14

Account Name Balance Explanation

Cash 38,000

Receivables 360,000

Inventory 505,000

Land 400,000

Buildings 670,000

Equipment 210,000

Total Assets 2,183,000

Accounts Payable 190,000

Long-term Liabilities 830,000

Common Stock 130,000

Additional Paid-In Capital 528,000

Retained Earnings 505,000

Total Liabilities & Equity 2,183,000 Summation of the above figures.

the subsidiary less the stock issue costs.

Parent company balance less $30,000 in combinationexpenses plus $115,000 gain on bargain purchase.

The parent's book value after stock issue to acquirethe subsidiary.

The parent's book value after the stock issue to acquire

Add the two book values.

Add the two book values plus the debt incurred by the

parent in acquiring the subsidiary.

Add the two book values

Summation of the above individual figures.

Add the two book values less acquisition costs.

Add the two book values, plus the fair value adjustment.

Add the two book values.




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Problem 02-14

Part b. Marshall and Tucker Consolidated Worksheet

MARSHALL COMPANY AND CONSOLIDATED SUBSIDIARY

Consolidation WorksheetJanuary 1, 2009

Marshall Tucker Consolidation Entries Consolidated

Accounts Company Company Debit Credit TotalsDebit Balances

Cash 18,000$ 20,000$ 38,000$ Correct!Receivables 270,000 90,000 360,000 Correct!Inventory 360,000 140,000 [A] 5,000 505,000 Correct!Land 200,000 180,000 [A] 20,000 400,000 Correct!Buildings (net) 420,000 220,000 [A] 30,000 670,000 Correct!Equipment (net) 160,000 50,000 210,000 Correct!

Investment in Tucker 515,000 [S] 460,000[A] 55,000 - Correct!

Total debits 1,943,000$ 700,000$ 2,183,000$ Correct!

Credit Balances

Accounts payable 150,000$ 40,000$ 190,000$ Correct!Long-term liabilities 630,000 200,000 830,000 Correct!Common stock 130,000 120,000 [S] 120,000 130,000 Correct!Additional paid-In capital 528,000 - 528,000 Correct!Retained earnings, 1/1/09 505,000 340,000 [S] 340,000 505,000 Correct!

Total credits 1,943,000$ 700,000$ 2,183,000$ Correct!


4/12

Given Data P02-14:

Grant Company outstanding common stock 100%

acquired by Lee CompanyLong-term liabilities issued by Lee for acquisition 200,000$Lee Company's $1 par common stock issued 20,000

for acquisition - number of sharesFair market value of Lee stock 10$Fees paid by Lee for arranging acquisition 30,000Stock issuance costs paid by Lee 12,000Grant Company inventory - undervalued 5,000Grant Company land - undervalued 20,000Grant Company buildings - undervalued 30,000

Marshall Tucker

Company Company

Book Book

Value Value

Cash 60,000$ 20,000$Receivables 270,000 90,000Inventory 360,000 140,000Land 200,000 180,000Buildings (net) 420,000 220,000Equipment (net) 160,000 50,000

Accounts payable (150,000) (40,000)Long-term liabilities (430,000) (200,000)Common stock - $1 par (110,000)Common stock - $20 par (120,000)Additional paid-in capital (360,000)Retained earnings, 1/1/09 (420,000) (340,000)


5/12


Problem 02-15

- Purchase price and account allocation

Consideration transferred at fair value 495,000$Book value 265,000Excess fair over book value 230,000 Correct!Allocation of excess fair value to

specific assets and liabilities-to Computer software 50,000-to Equipment (10,000)-to Client contracts 100,000

-to IPR&D 40,000-to Notes payable (5,000) 175,000

Goodwill $55,000 Correct!

PRATT COMPANY AND SPIDER, INC.

Consolidation WorksheetDecember 31, 2009

Consolidation Entries ConsolidatedAccounts Pratt Spicer Debit Credit Totals

Cash 36,000$ 18,000$ 54,000$ Correct!Receivables 116,000 52,000 168,000 Correct!Inventory 140,000 90,000 230,000 Correct!Investment in Spider 495,000 - [S] 265,000 - Correct!

[A] 230,000Computer software 210,000 20,000 [A] 50,000 280,000 Correct!Buildings (net) 595,000 130,000 725,000 Correct!Equipment (net) 308,000 40,000 [A] 10,000 338,000 Correct!Client contracts - - [A] 100,000 100,000 Correct!R&D asset [A] 40,000 40,000 Correct!Goodwill - - [A] 55,000 55,000 Correct!Total assets 1,900,000 350,000 1,990,000$ Correct!

Accounts payable (88,000) (25,000) (113,000) Correct!Notes payable (510,000) (60,000) [A] 5,000 (575,000) Correct!Common stock (380,000) (100,000) [S] 100,000 (380,000) Correct!Additional paid-in capital (170,000) (25,000) [S] 25,000 (170,000) Correct!

Retained earnings (752,000) (140,000) [S] 140,000 (752,000) Correct!Total liabilities and equities (1,900,000) (350,000) (1,990,000)$ Correct!


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Problem 02-15

PRATT COMPANY AND SUBSIDIARY

Consolidated Balance Sheet

December 31, 2009

Cash 54,000$Receivables 168,000Inventory 230,000Computer software 280,000Buildings (net) 725,000Equipment (net) 338,000Client contracts 100,000

R&D asset 40,000Goodwill 55,000Total assets 1,990,000$

Accounts payable (113,000)$Notes payable (575,000)Common stock (380,000)Additional paid-in capital (170,000)Retained earnings (752,000)Total liabilities and equities (1,990,000)$ Correct!

Correct!


7/12

Given Data P02-15:

Spider, Inc. outstanding stock 100%

acquired by Pratt CompanyCash paid by Pratt for acquisition 495,000$Assessment of Spider's fair and book value differences:

Book Fair

Values Values

Computer software 20,000$ 70,000$Equipment 40,000 30,000Client contracts - 100,000In-process research and development - 40,000Notes payable (60,000) (65,000)

Pratt Spider

Cash 36,000$ 18,000$Receivables 116,000 52,000Inventory 140,000 90,000Investment in Spider 495,000 -

Computer software 210,000 20,000Buildings (net) 595,000 130,000Equipment (net) 308,000 40,000Client contracts - -Goodwill - -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)$

December 31, 2009 Financial Information


8/12


Problem 02-25

Part a. Merrill, Inc. and Harriss Co. Statutory Merger

- Purchase price and account allocation

Cash paid 200,000$

Fair market value of shares issued 180,000Direct acquisition costs 10,000

Cost of acquisition 390,000

Cost of acquisition $390,000 Correct!Fair value of net assets acquired:

Cash 40,000

Receivables 80,000Inventory 130,000Land 60,000Buildings 140,000Equipment 50,000

Patent 30,000Accounts payable (30,000)Long-term liabilities (150,000) 350,000

Goodwill $40,000

MERRILL, INC.

General Journal

Cash 40,000

Receivables 80,000Inventory 130,000Land 60,000

Buildings 140,000Equipment 50,000Patent 30,000Goodwill 40,000Accounts Payable 30,000Long-Term Liabilities 150,000Cash 210,000

Common Stock (Merrill par value) 100,000Additional paid-in capital 80,000

(To record merger with Harriss at cost)

Additional Paid-in Capital 6,000Cash 6,000

(Stock issue costs incurred)

Correct!

Correct!

Correct!


9/12


Problem 02-25

Part b.

MERRILL, INC.

General Journal

Account Debit Credit

Investment in Harriss Co. 380,000Cash 200,000

Common Stock (Merrill par value) 100,000Additional Paid-in Capital 80,000

(To record purchase of Harriss' shares)

Investment in Harriss Co. 10,000Cash 10,000

(Direct combination costs incurred)

Additional Paid-in Capital 6,000Cash 6,000

(Stock issuance costs incurred)

MERRILL, INC., AND HARRISS CO.

Consolidation WorksheetJanuary 1, 2008

Merrill, Harriss Consolidation Entries ConsolidatedAccounts Inc. Co. Debit Credit Totals

Debits

Cash 84,000$ 40,000$ 124,000$Receivables 160,000 90,000 [A] 10,000 240,000

Inventory 220,000 130,000 350,000

Investment in Harriss 390,000 - [S] 280,000 -[A] 110,000Land 100,000 60,000 160,000Buildings 400,000 110,000 [A] 30,000 540,000Equipment 120,000 50,000 170,000Patent - - [A] 30,000 30,000Goodwill - - [A] 40,000 40,000

Totals 1,474,000$ 480,000$ 1,654,000$

Credits

Accounts payable 160,000$ 30,000$ 190,000$Long-term liabilities 380,000 170,000 [A] 20,000 530,000Common stock 500,000 40,000 [S] 40,000 500,000

Additional paid-in capital 74,000 - 74,000Retained earnings 360,000 240,000 [S] 240,000 360,000

Totals 1,474,000$ 480,000$ 1,654,000$


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Correct!

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12/12

Given Data P02-25

Harriss Company outstanding voting shares 100%

acquired by Merrill Inc.Cash paid by Merrill to acquire shares 200,000$Merrill Company's $10 par common stock issued 10,000

for acquisition - number of sharesFair market value of Merrill stock at acquisition date 18$Fees paid by Merrill for arranging acquisition 10,000Stock issuance costs paid by Merrill 6,000Harriss Company fully amortized patent - value 30,000

Merrill, Inc. Harriss Company

Book Book Fair

Value Value Value

Cash 300,000$ 40,000$ 40,000$Receivables 160,000 90,000 80,000

Inventory 220,000 130,000 130,000Land 100,000 60,000 60,000Buildings (net) 400,000 110,000 140,000Equipment (net) 120,000 50,000 50,000Accounts payable (160,000) (30,000) (30,000)Long-term liabilities (380,000) (170,000) (150,000)

Common stock (400,000) (40,000)Retained earnings (360,000) (240,000)

chapter 02 xlsol

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