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.

	Padre Company					Sol Company
	Book Values					Book Values					Fair Values
	12/31					12/31					12/31
Cash		$	509,000				$	57,350				$	57,350
Receivables			234,750					304,000					304,000
Inventory			412,500					238,000					296,500
Land			725,000					154,000					133,000
Building and equipment (net)			685,000					407,000					476,700
Franchise agreements			274,000					226,000					257,800
Accounts payable			(380,000	)				(195,000	)				(195,000	)
Accrued expenses			(145,000	)				(52,750	)				(52,750	)
Longterm liabilities			(917,500	)				(555,000	)				(555,000	)
Common stock—$20 par value			(660,000	)
Common stock—$5 par value								(210,000	)
Additional paid–in capital			(70,000	)				(90,000	)
Retained earnings, 1/1			(627,500	)				(255,000	)
Revenues			(968,250	)				(420,600	)
Expenses			928,000					392,000

Note: Parentheses indicate a credit balance.

On December 31, Padre acquires Sol’s outstanding stock by paying $412,000 in cash and issuing 10,200 shares of its own common stock with a fair value of $40 per share. Padre paid legal and accounting fees of $22,800 as well as $10,500 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.)

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:- The value that would be shown in padres consolidated financial statements for each of the accounts listed. Accounts padre company Isd coup consolidated Book valkie Fairvalmela Financialnk. Inventory $ 412500 H$29650014$ 709,000 Land $725.000 H*133,000 $858,000 Buildings and equipmed $685000 + $476,700 $1,161,700 Franchise agreements $ 274.000 H$257,800 $ 531,800 Good will $97400 Revenues $968,250 Additional painting $263500 Expenses $950.800 Relained earnings,ile $627500 Retained earningo 12/31 $667750 working Note: o calculation of value of good will :- value of good will= purchase price - Fairvalue of sols company net Asset. purchase price = cash paid + Fair value of common stock = $412,000 +(10,200*$40) is purchase price = $820000 Fair value of ed's company Net asset := Fair value of all assets - fair value of all liabililies. -($ 57,350 +$304,000 + $ 296,500 + $ 133,000+ $476,700+$257,800)-($195,000 +$52.750+$555000) = $1,585,350 - $ 802,750 :: Faig vakie of Solis Company Net asset = $ 722,600 value of goodwill = 4820.000 - $722,600 .. value of good will = $97.400 issued

2) Revenues o padre companys book valle. - $968,250 3) Additional paid in capitale padre company additional paid in capital + Add ilional paid in capital issued to acanceire sol's company stock issuance costs. = $70000 7C*H0-420x10,200], $10,500 $ 70,000 + $804,000 - $10,500 = $263,500 :: Additional paid in capital - $ 263,500. 4) Ezpeuses = Book value of padre's expense + Legal and Qccoceuting fee. = $928,000 + $ 22,800 Expenses = $ 950,800 5) Retained earnings 12/31 = padre companys detained earningo 1/1 + (padre's devenue - padre' ea peuse) = $627,500 + 6968250-928,000) = $627.500 + $ 40250 i. Retained earnings 12/31 = $ 667750