Case 4 par paid 70000 to acquire all of the common

This preview shows page 42 - 45 out of 50 pages.

Case 4. Par paid $70,000 to acquire all of the common shares of Sub. Case 5. Par paid $63,000 to acquire 90 percent of the common shares of Sub. Required: For each of the five cases, prepare a consolidated balance sheet as at January 1, Year 2. Problem 3 The balance sheets of Petron Co. and Seeview Co. on June 29, Year 2, were as follows: Petron Seeview Cash and receivables $ 80,000 $ 16,250 Inventory 47,500 7,500 Plant assets (net) 190,000 58,750 Intangible assets 20,000 5,000 $337,500 $ 87,500 Current liabilities $ 52,500 $ 25,000 Long-term debt 81,250 37,500 Common shares 127,500 38,750 Retained earnings (deficit) 76,250 (13,750) $337,500 $ 87,500
Image of page 42

Subscribe to view the full document.

162 CHAPTER 4 CONSOLIDATED STATEMENTS ON DATE OF ACQUISITION On June 30, Year 2, Petron Co. purchased 90 percent of the outstanding shares of Seeview Co. for $40,500 cash. Legal fees involved with the acquisition were an additional $1,000. The book value of Seeview’s net assets were equal to fair value except for the following: Fair value Inventory 8,750 Plant assets 67,500 Intangible assets 7,500 Long-term debt 32,500 Seeview has a five-year agreement to supply goods to Customer. Both Petron and Seeview believe that Customer will renew the agreement at the end of the cur- rent contract. The agreement is between Seeview and Customer; it cannot be trans- ferred to another company without Seeview’s consent. Seeview does not report any value with respect to this contract on its balance sheet. However, an independent appraiser feels that this contract is worth $10,000. Required: Prepare the consolidated balance sheet of Petron Co. on June 30, Year 2. (Round all calculations to the nearest dollar.) Problem 4 The balance sheets of Hill Corp. and McGraw Ltd. on December 31, Year 4, were as follows: Hill Corp. McGraw Ltd. Cash $ 13,000 $ 6,500 Accounts receivable 181,300 45,500 Inventory 117,000 208,000 Land 91,000 52,000 Plant and equipment 468,000 377,000 Investment in McGraw Ltd. 288,000 Goodwill 117,000 39,000 $1,275,300 $728,000 Current liabilities $ 156,000 $104,000 Long-term debt 416,000 286,000 Common shares 520,000 390,000 Retained earnings 183,300 (52,000) $1,275,300 $728,000 On December 30, Year 4, Hill purchased 80 percent of the common shares of McGraw for $288,000. On this date the inventory of McGraw had a fair value of $214,500, its land had a fair value of $91,000, and its plant and equipment had a fair value of $364,000. Required: Prepare a consolidated balance sheet as at December 31, Year 4.
Image of page 43
CHAPTER 4 CONSOLIDATED STATEMENTS ON DATE OF ACQUISITION 163 Problem 5 Following are the statements of financial position of Blue Ltd. and Joy Corp. on December 31, Year 2. Blue Ltd. Joy Corp. Plant and equipment $ 440,000 $320,000 Investment in Joy Corp. 424,000 Inventory 105,000 220,000 Accounts receivable 78,000 35,000 Cash 17,000 5,000 $1,064,000 $580,000 Common shares $ 422,000 $300,000 Retained earnings 224,000 (40,000) Long-term debt 250,000 240,000 Current liabilities 168,000 80,000 $1,064,000 $580,000 On December 31, Year 2, Blue purchased a percentage of the outstanding com- mon shares of Joy. On this date all but two categories of Joy’s identifiable assets and liabilities had fair values equal to book values. Below is the consolidated statement of financial position for Blue at December 31, Year 2. BLUE LTD. CONSOLIDATED STATEMENT OF FINANCIAL POSITION December 31, Year 2 Plant and equipment $ 860,000 Goodwill 150,000 Inventory 345,000 Accounts receivable 113,000 Cash 22,000 $1,490,000 Common shares $ 422,000 Retained earnings 224,000 Non-controlling interest 106,000 Long-term debt 490,000 Current liabilities 248,000 $1,490,000 Required: (a)
Image of page 44

Subscribe to view the full document.

Image of page 45
  • Fall '12
  • Smith
  • Balance Sheet, consolidated balance sheet, S Ltd, acquisition differential, hiL01537_ch04_120-169.indd Page

{[ snackBarMessage ]}

Get FREE access by uploading your study materials

Upload your study materials now and get free access to over 25 million documents.

Upload now for FREE access Or pay now for instant access
Christopher Reinemann
"Before using Course Hero my grade was at 78%. By the end of the semester my grade was at 90%. I could not have done it without all the class material I found."
— Christopher R., University of Rhode Island '15, Course Hero Intern

Ask a question for free

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern