Consolidation at date of acquisition (purchase price greater than book value, acquisition journal entries, deferred tax liability) Assume that the parent company acquires its subsidiary by exchanging 118,000 shares of its $1 par value Common Stock, with a market value on the acquisition date of $30 per share, for all of the outstanding voting shares of the investee. In its analysis of the investee company, the parent values all of the subsidiary's assets and liabilities at an amount equaling their book values except for PPE assets that are undervalued by $1 million, an unrecorded Customer List that the parent values at $200,000, and an unrecorded Brand Name asset valued at $500,000. And, finally, assume that the tax basis of the PPE assets is equal to their book values, and your tax rate is 35%.
b. Given the following acquisition-date balance sheets for the parent and its subsidiary, prepare the consolidation spreadsheet.
Elimination Entries
Balance Sheet Parent Subsidiary Dr Cr Consolidated
Assets
Cash $783,300 $104,000 $Answer
Accounts receivable 384,000 696,000 Answer
Inventory 582,000 894,000 Answer
Equity investment 3,540,000 Answer [E] Answer Answer [A]
Property, plant and
equipment (PPE), net 14,899,600 1,654,000 [A] Answer Answer
Customer list [A] Answer Answer
Brand name [A] Answer Answer
Goodwill [A] Answer Answer
$20,188,900 $3,348,000 $Answer
Liabilities and stockholders' equity
Accounts payable $188,100 $127,000 $Answer
Accrued liabilities 220,800 221,000 Answer
Long-term liabilities 2,000,000 1,000,000 Answer [A] Answer
Common stock 680,000 200,000 [E] Answer Answer
APIC 5,200,000 250,000 [E] Answer Answer
Retained earnings 11,900,000 1,550,000 [E] Answer Answer
$20,188,900 $3,348,000 Answer Answer $Answer
Would like to know how to calculate the retained earnings and goodwill portions of this problem. The rest I have already answered.
A previous response to this question gave 10000 as the answer for goodwill and this is not correct according to the homework checker.