Question

Following are preacquisition financial balances for Padre Company and Sol Company as of December 31. Also included are fair values for Sol Company accounts. Cash Receivables Inventory Land Building and equipment (net) Franchise agreements Accounts payable Accrued expenses Longterm liabilities Common stock-$20 par value Common stock-$5 par value Additional paid-in capital Retained earnings, 1/1 Revenues Expenses Padre Company Sol Company Book Values Book Fair Values Values 12/31 12/31 12/31 $ 115,250 54,400 $ 54,400 240,750 353,000 353,000 440,000 286,000 341,300 680,000 163,000 142,500 835,000 294,000 363,700 313,000 229,000 259,900 (319,000) (147,000) (147,000) (127,000) (30,000) (30,000) (957, 500) (597,500) (597,500) (660,000) (210,000) (70,000) (90,000) (437,500) (284,000) (1,015, 000) (399,900) 962,000 379,000 Note: Parentheses indicate a credit balance. On December 31, Padre acquires Sol's outstanding stock by paying $253,500 in cash and issuing 14,700 shares of its own common stock with a fair value of $40 per share. Padre paid legal and accounting fees of $28.700 as well as $14,700 in stock issuance costs. Determine the value that would be shown in Padre's consolidated financial statements for each of the accounts listed. (Input all amounts as positive values.) Amounts Accounts Inventory Land Buildings and equipment Franchise agreements Goodwill Revenues Additional paid-in capital Expenses Retained earnings, 1/1 Retained earnings, 12/31

Answer 1

Answer:

Accounts	Amounts
Inventory ($440,000 + 341,300)	$     781,300
Land (680,000 + 142,500)	822,500
Building and equipment (835,000 + 363,700)	1,198,700
Franchise agreements (313,000 + 259,900)	572,900
Goodwill (Note-1)	91,200
Revenues	1,015,000
Additional paid in capital (Note-2)	349,300
Expense (962,000 + 28,700)	990,700
Retained earnings 1/1	427,500
Retained earnings 12/31 (Note-3)	451,800

Note-1: Calculation of Goodwill
Purchase price (253,500 + (14,700 × $40))		$    841,500
Fair value of Sol's net assets:
Assets (54,400+353,000+341,300+142,500+363,700+259,900)	$ 1,514,800
Liabilities (147,000+20,000+597,500)	764,500
Fair value of Sol's net assets		750,300
Goodwill		$      91,200
Note-2: Calculation of Additional paid in capital
Padre Company's beginning paid in capital	$        70,000
Additional paid in capital issued (14,700 × ($40 - 20))	294,000
Less: Stock issuance cost	14,700
Additional paid in capital	$     349,300
Note-3: Calculation of retained earnings 12/31
Opening retained earnings 1/1	$     427,500
Net income (Income - expense) i.e. 1,015,000 - 990,700	24,300
Retained earnings 12/31	$     451,800