Question

On June 30, 2017, Wisconsin, Inc., issued $288,000 in debt and 17,300 new shares of its $10 par value stock to Badger Company owners in exchange for all of the outstanding shares of that company, Wisconsin shares had a fair value of $40 per share. Prior to the combination, the financial statements for Wisconsin and Badger for the six-month period ending June 30, 2017, were as follows: $ $ $ Badger (353,000 249.000 (164,000) (239,000) (104.000) Revenues Expenses Net Income Retained earnings, 1/1 Net Income Dividends declared Retained earnings, 6/30 Cash Receivables and inventory Patented technology (net) Equipment (net) Total assets Liabilities Common stock Additional paid-in capital Retained earnings Total liabilities and equities Wisconsin $ (1,613,000) 752,000 5 (261,000) $ (803,000) (261.000) 92.500 $ (971,500) $1,500 415,000 925,000 765.000 $ 2,156,500 $ (555,000) (360,000) (270,000) (971, 500 $(2,156,500) $ (343,000) $ 60,000 188, eee 337,000 640,000 $ 1,225,000 $ (412,000) (200,000) (270,000) (343,000) 5(1,225,000)

Answer 1

a	Net income	291000	261000-30000	(adjusted for professional services expense. The figures earned by the subsidiary prior to the takeover are not included)
b	R/E	803000
c	Patent	1205000	925000+280000
d	Goodwill	164000
e	liabilities	1255000	555000+412000+288000	the parent's book value plus the fair value of the subsidiary's debt plus the debt issued by the parent in acquiring the subsidiary
f	common stock	533000	360000+173000
g	APIC	749000	270000+519000-40000

Working
Investment Entry
Accounts	debit	credit
Investment in Badger	980000
Common stock		173000
Additional Paid in capital		519000
Liabilities		288000
(300000+15000*40)
Payment to broker
Accounts	debit	credit
Professional services expense	30000
Additional Paid in capital	40000
Cash		70000
Consideration Transferred for Badger	980000
Less:Book Value	813000
Fair value iin excess of book value	167000
Allocated to
Equipment	60000
Patent	-57000
Goodwill	164000