Question

On January 1, 2021, Casey Corporation exchanged $3,213,000 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) $ $ 3,213,000 2,600,000 $ 613,000 344,000 (149,000) 195,000 $ 418,000 Immediately after closing the transaction, Casey and Kennedy prepared the following postacquisition balance sheets from their separate financial records (credit balances in parentheses). Accounts Cash Accounts receivable Inventory Investment in Kennedy Buildings (net) Licensing agreements Goodwill Intallassat Casey Kennedy 492,000 $ 153,750 1,595,000 283,000 1,460,000 111, 250 3,213,000 5,662,500 2,480,000 0 2,690,000 179,500 $.....1.3..692.999... $.... 5.718. ann.

Answer 1

Casey Corporation and its subsidiary Kennedy Corporation

Worksheet for a consolidate balance sheet January 1,2021

Accounts	Casey	Kennedy	Debit	Credit	Consolidated
Cash	$492,000	$153,750			$645,750
Accounts receivable	$1,595,000	$283,000			$1,878,000
Inventory	$1,460,000	$111,250			$1,571,250
Investment in Kennedy	$3,213,000	$		$2,600,000
				$613,000
Buildings (net)	$5,662,500	$2,480,000	$344,000		$8,486,500
Licensing agreements		$2,690,000		$149,000	$2,541,000
Goodwill	$179,500		$418,000		$597,500
Total assets	$12,602,000	$5,718,000			$15,720,000
Accounts payable	($382,000)	($418,000)			$800,000
Long term debt	($3,220,000)	($2,700,000)			$5,920,000
Common stock	($3,000,000)	($1,000,000)	$1,000,000		$3,000,000
Additional paid in capital		($500,000)	$500,000		$0
Retained earnings	($6,000,000)	($1,100,000)	$1,100,000		$6,000,000
Total liabilities and equities	($12,602,000)	($5,718,000)			$15,720,000