Question & Answer: Parent Company acquires a subsidiary by issuing 120,000 common shares with a market value of $30 per share for all of the subsidiary's commo…..

Parent Company acquires a subsidiary by issuing 120,000 common shares with a market value of $30 per share for all of the subsidiary’s common stock. The subsidiary’s assets and liabilities were recorded at fair values with the exception of equipment undervalued by $600,000. In addition, there were two unrecorded assets: a trademark valued at $350,000 and a customer list valued by the subsidiary at $200,000. The balance sheets of the parent and subsidiary immediately after the acquisition are presented below: Parent Subsidiary Cash $ 640,200 $ 423,100 Accounts Receivable 885,500 646,000 Inventory 960,000 765,700 Equity Investment 3,600,000 Property, plant and equipment (net) 1,230,300 1,080,200 $7,316,000 $2,915,000 Accounts payable $ 105,000 $ 132,000 Salaries payable 200,400 232,200 Long-Term Notes Payable 600,000 400,800 Common Stock 240,000 210,000 Additional paid-in capital 5,120,000 300,000 Retained earnings 1,050,600 1,640,000 $7,316,000 $2,915,000 Required: At what amounts will each of the following appear on the consolidated balance sheet? Inventory Equity Investment Property, plant and equipment (net of accumulated depreciation) Goodwill Common Stock Additional paid-in capital Retained Earnings Total Intangible Assets

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Question & Answer: Parent Company acquires a subsidiary by issuing 120,000 common shares with a market value of $30 per share for all of the subsidiary's commo…..
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Acquisition Price $3,600,000
Bok value acquired (423100+646000+765700+1080200-132000-2322200-400800) 2150000
Excess payment $1,450,000
Excess fair value -Equipment 600000
Excess fair value-Customer list 200000
Excess fair value-Trade Mark 350000
1150000
Goodwill $300,000
ans
Inventory 1725700
(960000+765700)
Equity Investment 3600000
Property, plant and equipment (net of accumulated depreciation)
7316000+600000 7916000
Goodwill $300,000
Common stock 240000
Additional paid-in capital 5120000
Retained eranings 1050600
Total Intangible assets 850000
(200000+350000+300000)

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