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 Book Values 12/31 | Sol Company | |
Book Values 12/31 | Fair Values 12/31 | ||
Cash | $ 400,000 | $ 120,000 | $ 120,000 |
Receivables | 220,000 | 300,000 | 300,000 |
Inventory | 410,000 | 210,000 | 260,000 |
Land | 600,000 | 130,000 | 110,000 |
Building and equipment (net) | 600,000 | 270,000 | 330,000 |
Franchise agreements | 220,000 | 190,000 | 220,000 |
Accounts payable | (300,000) | (120,000) | (120,000) |
Accrued expenses | (90,000) | (30,000) | (30,000) |
Long-term liabilities | (900,000) | (510,000) | (510,000) |
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 | (390,000) | (240,000) |
|
Revenues | (960,000) | (330,000) |
|
Expenses | 920,000 | 310,000 |
|
Note: Parentheses indicate a credit balance.
On December 31, Padre acquires Sol’s outstanding stock by paying $360,000 in cash and issuing 10,000 shares of its own common stock with a fair value of $40 per share. Padre paid legal and accounting fees of $20,000 as well as $5,000 in stock issuance costs.
Determine the value that would be shown in Padre and Sol’s consolidated financial statements for each of the accounts listed.
| Accounts |
Inventory | Revenues |
Land | Additional paid-in capital |
Buildings and equipment | Expenses |
Franchise agreements | Retained earnings, 1/1 |
Goodwill |
|
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