Question

On May 1, Burns Corporation acquired 100 percent of the outstanding ownership shares of Quigley Corporation in exchange for $702,500 cash. At the acquisition date, Quigley’s book and fair values were as follows: Book Value Fair Value Cash $ 107,500 $ 107,500 Receivables 288,000 288,000 Inventory 238,000 312,000 Land 164,500 120,500 Building and equipment (net) 339,000 423,000 Patented technology 0 220,000 Total assets $ 1,137,000 $ 1,471,000 Accounts payable $ 148,500 $ 148,500 Long-term liabilities 732,000 732,000 Common stock ($5 par value) 210,000 Additional paid-in capital 90,000 Retained earnings (43,500 ) Total liabilities and stockholders equity $ 1,137,000 Burns directs Quigley to seek additional financing for expansion through a new long-term debt issue. Consequently, Quigley will issue a set of financial statements separate from that of its new parent to support its request for debt and accompanying regulatory filings. Quigley elects to apply pushdown accounting in order to show recent fair valuations for its assets. Prepare a separate acquisition-date balance sheet for Quigley Corporation using pushdown accounting.

Answer 1

ANSWER :-

Q's Corporation Balance sheet Assets Amount (S) Cash Receivables Inventory Land Building and equipment Patented technology Goodwill 107,5001 288,000 312,000 120,500 423,000 220,000 112,000 Total assets 1,583,000 Liabilities and stockholder's equity Amount ($) Accounts payable Long-term liabilities Common stock ($5 per value) Additional paid-in capital Additional paid-in capital under pushdown accounting (Working note) 148,5001 732.000 210,000 90,000 402.500 Total liabilities and stockholder's equity 1.583.000

Working not:

Additional paid-in capital under pushdown accounting = {Exchanged cash - Common stock - Additional paid-in capital }

= $702,500 - $210,000 - $90,000

=$402,500

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