Question

Pratt Company acquired all of Spider, Inc.'s outstanding shares on December 31, 2018, for $499,450 cash. Pratt will operate Spider as a wholly owned subsidiary with a separate legal and accounting identity. Although many of Spider's book values approximate fair values, several of its accounts have fair values that differ from book values. In addition, Spider has internally developed assets that remain unrecorded on its books. In deriving the acquisition price, Pratt assessed Spider's fair and book value differences as follows Book Values Fair Values $ 30,000 61,750 Computer software Equipment Client contracts In-process research and development Notes payable 70,000 57,100 120,800 34,250 (105, 200) (96,000) At December 31, 2018, the following financial information is available for consolidation Pratt Spider Cash Receivables Inventory Investment in Spider Computer software Buildings (net) Equipment (net) Client contracts Goodwil1 9,750 $10,600 66, 500 103,500 104,000 133,500 499,450 241,000 613,500 314,000 30,000 172,400 70,000 $ 1,915,200 453,000 Total assets Accounts payable Notes payable Common stock Additional paid-in capital Retained earnings $ (89,700) (68,500) (96,000) 0,000) (100,000) (25,000) (511,500) (38 (170,000) (764,0) (163,509 Total liabilities and equities $(1,915,200) (453,000)

Answer 1

a)	Excess of fair value over book value
	Consideration transferred at fair value	$     4,99,450.00
	Book Value(Total Assets-Accounts Payable-Notes Payable)=($453000-68500-96000)	$     2,88,500.00
	Excess of fair value over book value=($499450-$288500)		$                                    2,10,950.00
	Computer Software=($61750-$30000)	$         31,750.00
	Equipment=($57100-$70000)	$       -12,900.00
	Client Contracts=($120800)	120800
	In Process Research & development=($34250)	34250
	Note Payable=(-$105200-(-$96000))	-9200	$                                    1,64,700.00
	Goodwill=($210950-$164700)		$                                        46,250.00
*	Book Value of Spider
	Retained Earnings	$     1,63,500.00
	Common Stock	$     1,00,000.00
	Additional Paid in Capital	$         25,000.00
	Book Value of Atlanta	$     2,88,500.00
		Pratt Company and Subsidiary Spider Inc. Company
		For the Year Ending December 31st,2018
		Consolidation Entries
		Pratt	Spider	Adjutments	Elimination	Consolidation
	Cash	$           9,750.00	$                                        10,600.00			$         20,350.00
	Accounts Receivable	$     1,04,000.00	$                                        66,500.00			$     1,70,500.00
	Inventory	$     1,33,500.00	$                                    1,03,500.00			$     2,37,000.00
	Investment in Spider	$     4,99,450.00			$    2,10,950.00
					$    2,88,500.00
	Computer Software	$     2,41,000.00	$                                        30,000.00	$          31,750.00		$     3,02,750.00
	Building(Net)	$     6,13,500.00	$                                    1,72,400.00			$     7,85,900.00
	Equipment(Net)	$     3,14,000.00	$                                        70,000.00		$       12,900.00	$     3,71,100.00
	Client Contracts	$                        -		$      1,20,800.00		$     1,20,800.00
	Research & Development			$          34,250.00		$         34,250.00
	Goodwill			$          46,250.00		$         46,250.00
	Total Assets					$   20,88,900.00
	Liabilities
	Accounts Payable	$       -89,700.00	$                                      -68,500.00			$    -1,58,200.00
	Notes Payable	$    -5,11,500.00	$                                      -96,000.00		$          9,200.00	$    -6,16,700.00
	Common Stock	$    -3,80,000.00	$                                   -1,00,000.00	$      1,00,000.00		$    -3,80,000.00
	Additional Paid in capital	$    -1,70,000.00	$                                      -25,000.00	$          25,000.00		$    -1,70,000.00
	Retained Earnings	$    -7,64,000.00	$                                   -1,63,500.00	$      1,63,500.00		$    -7,64,000.00
	Total Liabilities & Equity					$ -20,88,900.00
		Pratt & its Subsidiary Spider Inc.
		Consolidated Balance Sheet
		December 31st,2018
	Assets	Amt	Liabilities	Amt
	Cash	$         20,350.00	Accounts Payable	$      1,58,200.00
	Accounts Receivable	$     1,70,500.00	Notes Payable	$      6,16,700.00
	Inventory	$     2,37,000.00	Common Stock	$      3,80,000.00
	Investment in Spider	$                        -	Additional Paid in capital	$      1,70,000.00
			Retained Earnings	$      7,64,000.00
	Computer Software	$     3,02,750.00
	Building(Net)	$     7,85,900.00
	Equipment(Net)	$     3,71,100.00
	Client Contracts	$     1,20,800.00
	Research & Development	$         34,250.00
	Goodwill	$         46,250.00
	Total Assets	$   20,88,900.00	Total Liabilities & Equity	$    20,88,900.00