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Constructing the Consolidated Balance Sheet at Acquisition On January 1 of the current year, Liu Company...

Constructing the Consolidated Balance Sheet at Acquisition On January 1 of the current year, Liu Company purchased all of the common shares of Reed Company for $380,000 cash. Balance sheets of the two firms immediately after the acquisition follow: During purchase negotiations, Reed's PPE were appraised at $332,000 and all of its remaining assets and liabilities were appraised at values approximating their book values. Liu also concluded that an additional $33,000 (for goodwill) demanded by Reed's shareholders was warranted because Reed's earning power was better than the industry average. Prepare the consolidating adjustments and the consolidated balance sheet at acquisition. Use negative signs with consolidating adjustment answers, when appropriate.

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Consolidated Consolidated Adjustment Liu Reed Balance sheet Current Assets 70000 950000 0 1020000 (380000) Investment in Reed

Note:- Increase in PPE,net = 332000 - 305000

  = 27000

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