Jackson Company acquires 100% of the stock of Clark Corporation on January 1, 2020, for $4,100...
Jackson Company acquires 100% of the stock of Clark Corporation on January 1, 2020, for $4,100 cash. As of that date Clark has the following trial balance: Debit Credit Cash $ 500 Accounts receivable 600 Inventory 900 Buildings (net) (5 year life) 1,600 Equipment (net) (2 year life) 1,000 Land 900 Accounts payable $ 400 Long-term liabilities (due 12/31/22) 1,900 Common stock 1,000 Additional paid-in capital 700 Retained earnings 1,500 Total $ 5,500 $ 5,500 Net income and dividends reported by Clark for 2020 and 2021 follow: 2020 2021 Net income $ 120 $ 140 Dividends 40 50 The fair value of Clark’s net assets that differ from their book values are listed below: Fair Value Buildings $ 1,200 Equipment 1,350 Land 1,300 Long-term liabilities 1,750 Any excess of consideration transferred over fair value of net assets acquired is considered goodwill with an indefinite life.
A. Compute the amount of Clark’s equipment that would be reported in a December 31, 2020, consolidated balance sheet.
B.
Compute the amount of Clark’s buildings that would be reported in a December 31, 2020, consolidated balance sheet.
C. Compute the amount of Clark’s long-term liabilities that would be reported in a December 31, 2020, consolidated balance sheet
Homework Answers
A) Value of Clark's equipment that would be reported in consolidated balance sheet would be calculated as follows:
Book value of equipment= $1,000
Life of equipment left = 2 Years
Thus, value on 31st December 2020 would be $500 i.e. (1,000/2)
Note: we do not report Fair values in balance sheet.
B) Value of Clark's building to be reported in consolidated balance sheet would be:
Book value of buildings =$1,600
Life of the building= 5 years
Thus, value on 31st december 2020 would be $1,280 i.e[ ($1,600 - 320) where 320 is the depreciation for current year calculated as $1,600/5 years= $320]
Note: we do not take fair values in balance sheet.
C) Value of clark's long term liabilities would be $1,900
Note: we do not take fair values in balance sheet.
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Jackson Company acquires 100% of the stock of Clark Corporation
on January 1, 2020, for $4,100...
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0
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Credit balances are indicated by parentheses.
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$
300,000
$
220,000
Investment in Clay
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0
Equipment
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390,000
Liabilities
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Common stock
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