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Question

In 2016, Tesla Inc acquired all of the outstanding stock of SolarCity Corporation. Tesla issued .110 of

its common stock for each outstanding share of SolarCity for a total of 11,124,497 shares.  Fair value of Tesla's stock at the date of acquisition was $185.04 per share. Tesla also converted SolarCity employee options and restricted stock unit awards into equivalent awards in Tesla stock.  The fair value of vested awards was $87.5 million and the fair value of unvested awards was $95.9 million. Merger-related costs, paid in cash, totaled $21.7 Million  Following are the estimated fair values of SolarCity assets acquired and liabilities assumed. Tesla's balance sheet accounts are shown just prior to the acquisition. Book values for Tesla and SolarCity balance sheet accounts are assumed. Identifiable intangible assets acquired include developed technology, favorable leases, in process R&D, and the trade name.  (In thousands)


Tesla SolarCity

        Book Value Dr (Cr)          Book Value Dr (Cr)     Fair Value Dr(Cr)

              Current assets                                                                          $    5,800,000                    $  400,000                 $ 480,000

              Solar energy systems, leased and to be leased                            -                                  $ 4,800,000         $ 5,781,496

              Operating lease vehicles                                                          $             3,134,000             -                               -

              Property, Plant, Equipment net                                                 $             5,781,000  $ 800,000              $ 1,056,312

              Identifiable tangible assets  -    -                        $ 356,510

             Other assets                                                                              $                526,000  $ 904,196              $  838,772

             Accounts payable and accrued liabilities                             $           (4,300,000)   $ (475,000)            $ (468,668)

              Debt and capital leases                                                        $           (2,456,000)  $(3,400,000)          $ (3,403,840)

              Deferred revenue and other liabilities                                    $           (5,966,704)        $ (2,391,290)         $ (2,405,898)

              Capital stock                                                                             $           (5,628,023)  $ (1,300,000)                 N/A

              Retained deficit                                                                     $             3,085,727        $  662,094                     N/A

             Accumulated other comprehensive loss                           $                  24,000   -                                   N/A

             Total                                                                                                          -                           -                                   -


Assume Tesla recorded the acquisition as a stock investment

Required: 


A) Prepare the journal entry Tesla made to record the acquisition

B) Prepare the working paper to consolidate the balance sheet accounts of Tesla and SolarCity at the date of acquisition

C) Prepare the consolidated balance sheet at the date of acquisition

Top Answer

A) Journal entry to record transaction: Investment in the solar city will be debited by $431,532,462 Share capital issued... View the full answer

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