Question

Constructing the Consolidated Balance Sheet at Acquisition
On January 1 of the current year, Liu Company purchased all of the common shares of Reed Company for $380,000 cash. Balance sheets of the two firms immediately after the acquisition follow:

During purchase negotiations, Reed's PPE were appraised at $332,000 and all of its remaining assets and liabilities were appraised at values approximating their book values. Liu also concluded that an additional $33,000 (for goodwill) demanded by Reed's shareholders was warranted because Reed's earning power was better than the industry average.

Prepare the consolidating adjustments and the consolidated balance sheet at acquisition.

Use negative signs with consolidating adjustment answers, when appropriate.

	Liu Company	Reed Company	Consolidating Adjustments	Consolidated Balance Sheet
Current assets	$950,000	$70,000	Answer	Answer
Investment in Reed	380,000	-	Answer	Answer
PPE, net	1,600,000	305,000	Answer	Answer
Goodwill	-	-	Answer	Answer
Total assets	$2,930,000	$375,000		Answer
Liabilities	$450,000	$55,000	Answer	Answer
Contributed capital	1,850,000	280,000	Answer	Answer
Retained earnings	630,000	40,000	Answer	Answer
Total liabilities & stockholders' equity	$2,930,000	$375,000		Answer

Analyzing and Interpreting Income Tax Footnote
The following is an excerpt from Walmart's 2015 Form 10-K

A summary of the provision for income taxes is as follows ($ millions):
Current:
U.S. federal	$6,165
U.S. state and local	810
International	1,529
Total current tax provision	8,504
Deferred:
U.S. federal	(387)
U.S. state and local	(55)
International	(77)
Total deferred tax expense (benefit)	$(519)

a. What amount of income tax expense does Walmart report in its income statement for 2015?
$Answer million

b. How much of Walmart's income tax expense was determined from the company's tax returns?
$Answer million

c. How did deferred taxes affect Walmart's tax expense for the year?

Deferred taxes increased Walmart's income tax provision for the year.

Deferred taxes decreased Walmart's income tax provision for the year.

Deferred taxes did not affect Walmart's income tax provision for the year.

Answer 1

A E F G H I J 2 B D Balance Sheet Consolidating Liu Company Reed Company Adjustment $950,000 $70,000 3,80,000 16,00,000 3,05,000 3 Current Assets 4. Investment in Reed 5 Plant assets, net 6 Goodwill 7 Total assets 8 Liabilities 9 Contributed Capital 10 Retained earnings Total Liabilities & 11 stockholders equity Consolidated 0 $1,020,000 -3,80,000 27,000 19,32,000 (27,000 is the appreciation amount of Plant 33,000 33,000 $2,985,000 0] 5,05,000 -2,80,000 18,50,000 -40,000 6,30,000 $2,930,000 $375,000 4,50,000 18,50,000 6,30,000 55,000 2,80,000 40.000 $2,930,000 $375,000 29,85,000