Question

Chapter 3 Consolidated Financial Statements: Date of Acquisition Consolidation with Revaluations of Recorded Net Assets Panoz Corporation shares of stock, valued at $50 per share, to acquire all of the stock of Shelby. Ine. Panoz acquisition as a stock acquisition. millions) issues I million accounts for the Balance sheet information at the date of acquisition is as follows (in LO4 Panoz Corporation Book Value Dr (Cr) 10 Shelby, Inc. Book Value Dr (Cr) Fair Value Dr (Cr) $ 6 Inventory 40 350 50 (60) (200) (120) (100) Property and equipment, net. 10 100 90 Current liabilities. (20) (80) 10) 20) (78) Long-term liabilities . Capital stock Retained earnings Accumulated other comprehensive income. Treasury stock 10 20 2 Total Shelby has no previously unrecorded identifiable intangible assets. Required Calculate the amount of goodwill recognized for this acquisition. Prepare the consolidation working paper at the date of acquisition. Pre a. b. c. sent the consolidated balance sheet, in good form, at the date of acquisition.

Answer 1

b. Consolidation Workin rlin millions] Panoz Co ration and Its Subsidiary Shelbv. Inc. Consolidation worksheet (in Millions Accounts Taken from Books Panoz Dr (Cr Adiustment Entries Debit Consolidated Balance Dr (Cr Shelby Dr (Cr) Credit Cash and Receivables Invento Pro Investment in Shelb 10 10 100 16 47 440 350 50 and equipment, net 10 [R] 15 [E] 35 [R] Goodwill Current Liabilities Long-term liabilities Capital Stock Retained Earnings Accumulated Other comprehensive income Treasury Stock Total 45 78 280 120 100 10 20 45 60 20) R] 2 200) 120) 100) 10 20 (10) [E] 6) [E] 10 2 2 [E 65 65 Notes: Entry R is to record the excess fair value over book value of Shelby Entry E is to eliminate the stockholding equity of shelby