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AC 450 Unit 2 Problem 2-23 and 2- 24 (Advanced
Accounting)
Problem 2-23 [LO4, LO5, LO7]
On January 1, 2013, Marshall Company acquired 100 percent of the outstanding common stock of
Tucker Company. To acquire these shares, Marshall issued $190,950 in long-term liabilities and
21,600 shares of common stock having a par value of $1 per share but a fair value of $10 per share.
Marshall paid $31,200 to accountants, lawyers, and brokers for assistance in the acquisition and
another $23,100 in connection with stock issuance costs.
Prior to these transactions, the balance sheets for the two companies were as follows:
Marshall Company
Book ValueTucker Company
Book Value
Cash$88,000
$14,400
Receivables300,000
Inventory327,000
Land208,000
93,600
111,000
251,000
Buildings (net)430,000
297,000
Equipment (net)237,000
58,750
Accounts payable(186,000)
Long-term liabilities(510,000)
(58,750)
(281,000)
0
(366,000)
________________________________________
a.Determine the amounts that Marshall Company would report in its postacquisition balance sheet.
In preparing the postacquisition balance sheet, any required adjustments to income accounts from
the acquisition should be closed to Marshalls retained earnings. (Input all amounts as positive
values.)
b.Prepare a worksheet to consolidate the balance sheets of these two companies as of January 1,
2013. (Leave no cells blank - be certain to enter "0" wherever required. Enter the consolidation
entries of 'Investment in Tucker Company' in order of (S) Elimination of subsidiarys stockholders
equity and (A) Allocation of Tucker's consideration fair value in excess of book value. Input all
amounts as positive values except for the credit balances which should be entered with the minus
sign.)
Book
ValuesFair
Values
Computer software$49,500
Equipment55,500
36,400
Client contracts0
105,000
$88,500
29,750
At December 31, 2013, the following financial information is available for consolidation:
PrattSpider
Cash$15,500 $19,200
Receivables117,000 57,900
Inventory165,000 103,900
Investment in Spider478,050 0
Computer software250,000 49,500
Buildings (net)600,500 172,500
Equipment (net)319,000 55,500
Client contracts0 0
Goodwill0 0
_______________________________________________________________________________
________________________________________________________________________________
_________________________________________
Total assets$1,945,050 $458,500
_______________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
_
Accounts payable$(96,300) $(65,500)
Notes payable(530,750) (104,000)
Common stock(380,000) (100,000)
Additional paid-in capital(170,000) (25,000)
Retained earnings(768,000) (164,000)
_______________________________________________________________________________
________________________________________________________________________________
_________________________________________
Total liabilities and equities$(1,945,050) $(458,500)
_______________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
_
________________________________________
Note: Parentheses indicate a credit balance.
Prepare a consolidated balance sheet for Pratt and Spider as of December 31, 2013. (Input all
amounts as positive values.)