Computation of Consolidated Balances
Retail Records Inc. acquired all of Decibel Studios’ voting shares on January 1, 20X2, for $280,000. Retail’s balance sheet immediately after the combination contained the following balances:
RETAIL RECORDS INC. Balance Sheet January 1, 20X2 | |||
Cash and Receivables | $120,000 | Accounts Payable | $ 75,000 |
Inventory | 110,000 | Taxes Payable | 50,000 |
Land | 70,000 | Notes Payable | 300,000 |
Buildings and Equipment (net) | 350,000 | Common Stock | 400,000 |
Investment in Decibel Stock | 280,000 | Retained Earnings | 105,000 |
Total Assets | $930,000 | Total Liabilities and Stockholders’ Equity | $930,000 |
Decibel’s balance sheet at acquisition contained the following balances:
DECIBEL STUDIOS Balance Sheet January 1, 20X2 | |||
Cash and Receivables | $ 40,000 | Accounts Payable | $ 90,000 |
Inventory | 180,000 | Notes Payable | 250,000 |
Buildings and Equipment (net) | 350,000 | Common Stock | 100,000 |
Goodwill | 30,000 | Additional Paid-In Capital | 200,000 |
|
| Retained Earnings | (40,000) |
Total Assets | $600,000 | Total Liabilities and Stockholders’ Equity | $600,000 |
On the date of combination, the inventory held by Decibel had a fair value of $170,000, and its buildings and recording equipment had a value of $375,000. Goodwill reported by Decibel resulted from a purchase of Sound Stage Enterprises in 20X1. Sound Stage was liquidated and its assets and liabilities were brought onto Decibel’s books.
Required
Compute the balances to be reported in the consolidated balance sheet immediately after the acquisition for:
a.Inventory.
b.Buildings and Equipment (net).
c.Investment in Decibel Stock.
d.Goodwill.
e.Common Stock.
f.Retained Earnings.
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