Question

On June 30, 2017, Wisconsin, Inc., issued $315,450 in debt and 18,100 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:

	Wisconsin				Badger
Revenues	$	(985,000	)		$	(462,000	)
Expenses		707,000				293,000
Net income	$	(278,000	)		$	(169,000	)
Retained earnings, 1/1	$	(801,000	)		$	(236,000	)
Net income		(278,000	)			(169,000	)
Dividends declared		105,000				0
Retained earnings, 6/30	$	(974,000	)		$	(405,000	)
Cash	$	42,000			$	79,000
Receivables and inventory		413,000				216,000
Patented technology (net)		911,000				347,000
Equipment (net)		739,000				664,000
Total assets	$	2,105,000			$	1,306,000
Liabilities	$	(501,000	)		$	(431,000	)
Common stock		(360,000	)			(200,000	)
Additional paid-in capital		(270,000	)			(270,000	)
Retained earnings		(974,000	)			(405,000	)
Total liabilities and equities	$	(2,105,000	)		$	(1,306,000	)

Wisconsin also paid $39,700 to a broker for arranging the transaction. In addition, Wisconsin paid $41,600 in stock issuance costs. Badger’s equipment was actually worth $796,750, but its patented technology was valued at only $322,900.

What are the consolidated balances for the following accounts? (Input all amounts as positive values)

Net Income

Retained earnings 1/1/17

Patented Technology

Goodwill

Liabilities

Common stock

Additional paid-in capital

Answer 1

Retained earnings + Additional paid Answert a) Net Income s Revenue - Eapenses - Brokerage. = $985,000 - $707000-$39,700 :Net Income = $238. 300 b) the consolidated balance for the retained earnings /1/201 is $801.000 c) patented Technology = Book value of the patent company+ Fair value of the subsidiary = $911.000 + $392,900 ... patented Technology = $1,233,900 d) Goodwill = purchase cost of Badger's - Bcok value of aequisition of Badger's purchase cost of Badger's Debt issued & stock issued at S fair value. = $3/5,450 +(18loo shares * $40) = $315.450 + $724,000 :: purchase cost of Bodger's = $1039.450 et acquisition of Badger's common stock + ned earnings + Additional paid in capital- undervaluation in patent + over valuation in equipment. = $200,000+ $405,000 + $ 270,000-322,900+ 405.000)+ 79,750- $664,000) =$ 875,000 - $82,100+ $132,750 .: Book value of acquisition of Badgers - $925,650 Good will = $1,039,450 - $985,650 .. Good will = $ 113,800. e) Liabililies = Liability of Wisconsin + Li ability of Badgers + Additional liabilily issued. :: Liabililys = $501,000 +$ 431,000+ $315,450 i. Liabilities = $1,247,450 $) Common stock = Existing valece of shares + Additional Shaves issued at par value. $360,000 +(18,100 x$10) = $360,000 + $ 181000 :. Common stock = $541,000 g) Additional paid in capital = Additional share issuedat fair value - Additional shares isxud at par value - Issue cost (18,100x $40)-(18,100x$0) - $41600 $724,000-$181000 - $41.600 .. Additional paid in Capital = $501,400.