Question

On January 1, 2018 Casey Corporation exchanged $3,205,000 cash for 100 percent of the outstanding voting stock of Kennedy Corporation. Casey plans to maintain Kennedy as a wholly owned subsidiary with separate legal status and accounting information systems. At the acquisition date. Casey prepared the following fair-value allocation schedule: Fair value of Kennedy (consideration transferred) Carrying amount acquired Excess fair value to buildings (undervalued) to licensing agreements (overvalued) to goodwill indefinite life) $ 3,205,000 2,600,000 $ 605,000 $ 323,000 (191,000) 132,000 473,000 Immediately after closing the transaction, Casey and Kennedy prepared the following postacquisition balance sheets from their separate financial records. $ Accounts Cash Accounts receivable Inventory Investment in Kennedy Buildings (net) Licensing agreements Goodwill Total assets Casey 466,000 1,595,000 1.335,000 3,205,000 6,135,000 Kennedy 154,500 315.000 428,500 2,478,000 3,120,000 251,000 12,987,000 $ $ 6,488,000

Answer 1

Consolidated Balance sheet :

Description	C $	K $	Adjustements and Eliminations		Consolidated Totals $
			Debit $	Credit $
Cash	466000	154500			620500
Accounts receivable	1595000	315000			1910000
Inventory	1335000	428500			1763500
Investment in K	3205000	0		2600000
				605000	0
Buildings (net)	6135000	2470000	323000		8928000
Liscensing Agreements	0	3120000		191000	2929000
Goodwill	251000	0	473000		724000
Total Assets	12987000	6488000			16875000
Accounts payable	-337000	-448000			-785000
Long term debt	-3650000	-3440000			-7090000
Common stock	-3000000	-1000000	1000000		-3000000
Additional paid in capital	0	-500000	500000		0
Retained earnings	-6000000	-1100000	1100000		-6000000
Total liabilities and equities					-16875000

NOTES:

1. The account balances for cash, accounts receivables ,inventory ,accounts payable have been added to arraive the consolidates totals
2. carrying amount acquired for $16,00,000 and excess fair value
3. In case of buildings , the under valued fair value is $38200I
4. The goodwill computed by adding the subsidiary company for $426000 and the parent company is $347000.