Question

On June 30, 2017, Wisconsin, Inc., issued $279,150 in debt and 19,200 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 $ (991,000 ) $ (347,000 ) Expenses 729,000 245,000 Net income $ (262,000 ) $ (102,000 ) Retained earnings, 1/1 $ (828,000 ) $ (290,000 ) Net income (262,000 ) (102,000 ) Dividends declared 97,000 0 Retained earnings, 6/30 $ (993,000 ) $ (392,000 ) Cash $ 69,000 $ 147,000 Receivables and inventory 454,000 236,000 Patented technology (net) 951,000 305,000 Equipment (net) 705,000 634,000 Total assets $ 2,179,000 $ 1,322,000 Liabilities $ (556,000 ) $ (460,000 ) Common stock (360,000 ) (200,000 ) Additional paid-in capital (270,000 ) (270,000 ) Retained earnings (993,000 ) (392,000 ) Total liabilities and equities $ (2,179,000 ) $ (1,322,000 ) Wisconsin also paid $36,800 to a broker for arranging the transaction. In addition, Wisconsin paid $46,200 in stock issuance costs. Badger’s equipment was actually worth $784,750, but its patented technology was valued at only $277,200. What are the consolidated balances for the following accounts?

Accounts	Amounts
Net Income
Retained earnings, 1/1/17
Patented Technology
Goodwill
Liabilities
Common Stock
Additional paid-in capital

Answer 1

Please refer the following image for the solution:  

Accounts Net Income Retained earnings, 1/1/17 Patented Technology Goodwill Liabilities Common Stock Additional paid-in capital Amounts $ 225,200 $ 828,000 $ 1,228,200 $ 6,600 $1,295,150 $ 552,000 $ 799,800 Working 1) Net Income Net Income of Wisconsin Inc $ 262,000 Less : Brokerage charges $ 36,800 $ 225,200 5) Liabilities Liability of Wisconsin Inc Add: Liability of Badger co Add: New debt $ 556,000 $ 460,000 $ 279,150 $ 1,295,150 2) Retained earnings, 1/1/17 Retained earnings of Wisconsin Inc on 1.1.17 $ 828,000 Retained earnings of Badger company on 1.1.17 will not be included 6) Common Stock Common Stock of Wisconsin Inc $360,000 Add: Value of New Shares (19200shares*$10) $ 192,000 $ 552,000 3) Patented Technology Patent of Wisconsin Inc Add: fair value of Badger company's patent $ 951,000 $ 277,200 $ 1,228,200 7) Additional paid-in capital Additional Paid in capital of Wisconsin Inc $ 270,000 Add: Value of New Shares (19200shares*$30) $ 576,000 Less : Issuance cost $ 46,200 4) Goodwill Consideration transfered (Face value ) for Badger stock (19200 shares *$40) +$279,150(debt) $ 1,047,150 $ 799,800 $ $ 862,000 185,150 Less:Book value of Badger ($1,322,000 - $460,000) (Total assets - Liabilites) Fair value in excess of book value Excess fair value (under valued equipment) ($784,750 - $634,000) Excess fair value (over valued Patented technology) ($305,000 - $277,200) Goodwill $ 150,750 $ $ 27,800 6,600