Question

Pratt Company acquired all of Spider, Inc.'s outstanding shares on December 31, 2018, for $550,200 cash. Pratt will operate Spider as a wholly owned subsidiary with a separate legal and accounting identity. Although many of Spider's book values approximate fair values. several of its accounts have fair values that differ from book values. In addition, Spider has internally developed assets that remain unrecorded on its books. In deriving the acquisition price, Pratt assessed Spider's fair and book value differences as follows: Book Values $ 26,000 60,000 Computer software Equipment client contracts In process research and development Notes payable Fair Values $ 90,500 43,300 139,000 26,000 (113, 100) (103,500) At December 31, 2018, the following financial information is available for consolidation: $ Spider 45,000 89,000 1ee,eee Cash Receivables Inventory Investment in Spider Computer software Buildings (net) Equipment (net) client contracts Goodwill Total assets Accounts payable Pratt 9,400 113,500 144,000 550, 200 242,500 601,250 279,000 26,000 150,500 60,000 $ 1,939,850 $ (95,100) 5 468,500 (55,000)

Answer 1

Answer:

Working Notes-

Consideration transferred at fair value		$ 550,200.00
Book value		310,000.00
Excess fair over book value		240,200.00
Allocation of excess fair value to specific assets and liabilities:
computer software	64,500.00
equipment	(16,700.00)
client contracts	139,000.00
research and development	26,000.00
notes payable	(9,600.00)	(203,200.00)
Goodwill		$ 37,000.00

Particulars	Pratt	Spider	Debit	Credit	Consolidated
Cash	9,400.00	43,000.00			52,400.00
Receivables	113,500.00	89,000.00			202,500.00
Inventory	144,000.00	100,000.00			244,000.00
Investment in Spider	550,200.00	-		(S)$310,000 (A) 240,200	-
Computer software	242,500.00	26,000.00	(A)$64,500		333,000.00
Buildings (net)	601,250.00	150,500.00			751,750.00
Equipment (net)	279,000.00	60,000.00		(A)16,700	322,300.00
Client contracts	-	-	(A)139,000		139,000.00
Research and Development			(A) 26,000		26,000.00
Goodwill	-	-	(A) 37,000		37,000.00
Total assets	1,939,850.00	468,500.00			2,107,950.00
Accounts payable	(95,100.00)	(55,000.00)			(150,100.00)
Notes payable	(519,750.00)	(103,500.00)		(A) 9,600	(632,850.00)
Common stock	(380,000.00)	(100,000.00)	(S)100000		(380,000.00)
Additional paid in capital	(170,000.00)	(25,000.00)	(S)25,000		(170,000.00)
Retained earnings	(775,000.00)	(185,000.00)	(S)185,000		(775,000.00)
Total liabilities and equities	(1,939,850.00)	(468,500.00)			2,107,950.00

Pratt Company and Subsidiary
Consolidated Balance Sheet
December 31,2018
Assets	$	Liabilities and Stockholders Equity	$
Cash	52,400.00	Accounts payable	150,100.00
Receivables	202,500.00	Notes payable	632,850.00
Inventory	244,000.00
Computer software	333,000.00
Buildings (net)	751,750.00
Equipment (net)	322,300.00
Client contracts	139,000.00	Common stock	380,000.00
R&D asset	26,000.00	Additional paid in capital	170,000.00
Goodwill	37,000.00	Retained earnings	775,000.00
Total assets	2,107,950.00	Total liabilities and equities	2,107,950.00