Question

On January 1, 2018 Casey Corporation exchanged $3,244,000 cash for 100 percent of the outstanding voting stock of Kennedy Corporation. Casey plans to maintain Kennedy as a wholly owned subsidiary with separate legal status and accounting information systems.

At the acquisition date, Casey prepared the following fair-value allocation schedule:

Fair value of Kennedy (consideration transferred)					$	3,244,000
Carrying amount acquired						2,600,000
Excess fair value					$	644,000
to buildings (undervalued)	$	366,000
to licensing agreements (overvalued)		(196,000	)			170,000
to goodwill (indefinite life)					$	474,000

Immediately after closing the transaction, Casey and Kennedy prepared the following postacquisition balance sheets from their separate financial records.

Accounts	Casey				Kennedy
Cash	$	524,000			$	192,000
Accounts receivable		1,455,000				334,000
Inventory		1,500,000				286,000
Investment in Kennedy		3,244,000				0
Buildings (net)		5,572,500				1,870,000
Licensing agreements		0				3,000,000
Goodwill		531,500				0
Total assets	$	12,827,000			$	5,682,000
Accounts payable	$	(387,000	)		$	(382,000	)
Long-term debt		(3,440,000	)			(2,700,000	)
Common stock		(3,000,000	)			(1,000,000	)
Additional paid-in capital		0				(500,000	)
Retained earnings		(6,000,000	)			(1,100,000	)
Total liabilities and equities	$	(12,827,000	)		$	(5,682,000	)

Prepare an acquisition-date consolidated balance sheet for Casey Corporation and its subsidiary Kennedy Corporation.

Answer 1

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CASEY CORPORATION AND CONSOLIDATED SUBSIDARY KENNEDY Worksheet for a consolidated Balance sheet January 1, 2021 Adjust. & Elim. Kennedy Delit Credit consolidate | Casey Cash. Accounts receivable Inventory Kennedy 524.000 192000 1,455,000 334, OUD 1 500 000 286,000 3, 244,000 Investment in 716,000 1789,000 1,766,000 2,600000 644,000 7,808,500 196 000 2,804,000 1,005,500 15,909,000 Building (het) Licensing agencements Good with 5, 572,500 1,870,000 360000 3,000,000 531,500 474000 12,827,000 5,682,000 Total Assets long-term debet 769 000 6,140,000 3000 OUD Accounts payable (3 87,000) (38 2,000) (3,949000) (2,700,000) Common Stock (3420,000) (1,000,000) 1,000,000 Additional poud-in capital (500,000) 500,000 6,000,000 1,100,000) 400,000 Total liabilities 12827,000) (5,682,000) 6000000 Retained feeuning & equities 159090750

Answer 2

Consolidated Balance Sheet
	Amount $	Working
Assets
Cash	716,000	=524000+192000
Accounts receivable	1,789,000	=1455000+334000
Inventory	1,786,000	=1500000+286000
Buildings (net)	7,808,500	=5572500+1870000+366000
Licensing agreements	2,804,000	=3000000-196000
Goodwill	1,005,500	=531500+474000
Total assets	15,909,000
Accounts payable	769,000	=387000+382000
Long-term debt	6,140,000	=3440000+2700000
Common stock	3,000,000
Retained earnings	6,000,000
Total liabilities and equities	15,909,000
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