On July 1, 2008, Rose Company exchanged 18,000 of its $35 fair value ($10 par value)...
On July 1, 2008, Rose Company exchanged 18,000 of its $35 fair value ($10 par value) shares for 16,000 of the outstanding shares of Daisy Company. Rose paid direct acqusition costs of $20,000 and $50,000 in stock issuance costs. Two companies had the following balance sheets on July 1, 2008:
|
Rose Co. Book Value |
Daisy Co. Book Value |
||||
|
Cash |
$ 150,000 |
$ 70,000 |
|||
|
Inventory |
120,000 |
60,000 |
|||
|
Land |
100,000 |
40,000 |
|||
|
Buildings (net) |
300,000 |
120,000 |
|||
|
Equipment (net) |
330,000 |
110,000 |
|||
|
TOTAL |
1,000,000 |
400,000 |
|||
|
Current Liabilities |
180,000 |
60,000 |
|||
|
Common Stock - $10 par value |
400,000 |
||||
|
Common Stock - $10 par value |
200,000 |
||||
|
Retained Earnings |
420,000 |
140,000 |
|||
|
TOTAL |
1,000,000 |
400,000 |
The following are fair values for Daisy’s assets: Inventory $65,000, Land $100,000, Building $150,000, and Equipment $75,000.
-
a) Record the investment in Daisy Company and any entry necessitated by the purchase.
-
b) Prepare a consolidated balance sheet for July 1, 2008.
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