Question

Pratt Company acquired all of Spider, Inc’s outstanding shares on December 31, 2018, for $513,100 cash. Pratt will operate Spider as a wholly owned subsidiary with a separate legal and accounting identity. Although many of Spider’s book values approximate fair values, several of its accounts have fair values that differ from book values. In addition, Spider has internally developed assets that remain unrecorded on its books. In deriving the acquisition price, Pratt assessed Spider’s fair and book value differences as follows:

	Book Values	Fair Values
Computer Software	$65,500	$120,750
Equipment	$82,500	$68,100
Client Contract	0	$129,000
In-process research and develop	0	$30,250
Notes Payable	(90,400)	(95,400)

At December 31, 2018, the following financial information is available for consolidation:

	Pratt	Spider
Cash	$13,700	$21,400
Receivables	140,500	41,500
Inventory	144,500	79,500
Investment in Spider	513,100	0
Computer Software	229,000	65,500
Buildings (net)	569,000	130,000
Equipment (net)	366,000	82,500
Client Contracts	0	0
Goodwill	0	0
Total assets	1,975,800	420,400
Accounts Payable	(93,300)	(59,500)
Notes Payable	(525,500)	(90,400)
Common Stock	(380,000)	(100,000)
Additional paid-in capital	(170,000)	(25,000)
Retained Earnings	(807,000)	(145,500)
Total liabilities and equities	(1,975,800)	(420,400)

Prepare a consolidated balance sheet for Pratt and Spider as of December 31, 2018.

Answer 1

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