Question

23 Pratt Company acquired all of Spider, Inc.'s outstanding shares on December 31, 2018, for $539,650 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: ports Equipment client contracts In process research and development Notes payable Book Values Fair Values $ 46,000 $ 106,500 79.500 60,000 124,000 28,750 166.000) (71.650) References At December 1, 2018, the following financial information is available for consolidation: 15.250 12.500 Receivables 145.00 4.500 Temst in spider Computer software Buildings net) Egent (net) Client Contract 149,000 79,500 323,000 Total se Mounts payable Notes payable C on OOR $ 1.969.250 9,500) (526,750) (380,000) S431.000 59,000) 66,000) (100,000)

Answer 1

Cash	$12,500
Receivables	$59,500
Inventory	$84,500
Computer Software	$106,500
Buildings (net)	$149,000
Equipment(net)	$60,000
Client contracts	$124,000
In house R&D	$28,750
Account payable	-$59,000
Notes payable	-$71,850
Identifiable Net assets	$493,900
Cash paid for consideration	$539,650
GOODWILL	$45,750
Cash	$28,350	Account payable	$150,500
Receivables	$220,000	Notes payable	$596,600
Inventory	$229,500	Common stock	$380,000
Computer Software	$358,000	Additional paid in capital	$170,000
Buildings (net)	$662,750	Retained earnings	$783,000
Equipment(net)	$383,000
Client contracts	$124,000
In house R&D	$28,750
Goodwill	$45,750
Total assets	$2,080,100	Total liabilities and equities	$2,080,100

Workings:

	Pratt	Identifiable Net assets of spider	Sum
Cash	$15,850	$12,500	$28,350
Receivables	$160,500	$59,500	$220,000
Inventory	$145,000	$84,500	$229,500
Investment in Spider	$539,650
Computer Software	$251,500	$106,500	$358,000
Buildings (net)	$513,750	$149,000	$662,750
Equipment(net)	$323,000	$60,000	$383,000
Client contracts	$0	$124,000	$124,000
In house R&D		$28,750	$28,750
Goodwill	$0		$45,750
Total assets	$1,949,250		$2,080,100
Account payable	$91,500	$59,000	$150,500
Notes payable	$524,750	$71,850	$596,600
Common stock	$380,000		$380,000
Additional paid in capital	$170,000		$170,000
Retained earnings	$783,000		$783,000
Total liabilities and equities	$1,949,250		$2,080,100

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