P02-24

Student Name:
Class:
Problem 02-24

- Purchase price and account allocation

Consideration transferred at fair value
Book value
Excess fair over book value
Allocation of excess fair value to
specific assets and liabilities
-to Computer software
-to Equipment
-to Client contracts
-to IPR&D
-to Notes payable
Goodwill

50,000
(10,000)
100,000
40,000
(5,000)
$

495,000
265,000
230,000

Correct!

175,000
55,000

Correct!

PRATT COMPANY AND SPIDER, INC.

Consolidation Worksheet
December 31, 2013

Accounts
Cash
Receivables
Inventory
Investment in Spider
Computer software
Buildings (net)
Equipment (net)
Client contracts
R & D asset
Goodwill
Total assets
Accounts payable
Notes payable
Common stock
Additional paid-in capital
Retained earnings
Total liabilities and equities

Pratt
Spicer
36,000 $
18,000
116,000
52,000
140,000
90,000
495,000
210,000
595,000
308,000
-

20,000
130,000
40,000
-

1,900,000 $

350,000

(88,000) $
(510,000)
(380,000)
(170,000)
(752,000)
$ (1,900,000) $

(25,000)
(60,000)
(100,000)
(25,000)
(140,000)
(350,000)

$
$

Page 1

Consolidation Entries
Debit
Credit

P02-24
PRATT COMPANY AND SUBSIDIARY
Consolidated Balance Sheet
December 31, 2013
Assets
Cash
Receivables
Inventory
Computer software
Buildings (net)
Equipment (net)
Client contracts
R & D asset
Goodwill
Total assets
Liabilities and Owners' Equity
Accounts payable
Notes payable
Common stock
Additional paid-in capital
Retained earnings
Total liabilities and equities

Page 2

P02-24

Consolidated
Totals
$
54,000
168,000
230,000
495,000

$
$

230,000
725,000
348,000
2,250,000

(113,000)
(570,000)
(480,000)
(195,000)
(892,000)
$ (2,250,000)

Correct!
Correct!
Correct!
Try again!
Try again!
Correct!
Try again!
Try again!
Try again!
Try again!
Try again!
Correct!
Try again!
Try again!
Try again!
Try again!
Try again!

Page 3

P02-24

Page 4

P02-29
Student Name:
Class:
Problem 02-29
Part C only:
PACIFICA INC., AND SEGUROS CO.
Consolidation Worksheet
December 31, 2012

Consolidation Entr
Accounts
Revenues
Expenses
Net income

Pacifica
(1,200,000)
890,000
(310,000)

Retained earnings, 1/1

Net income
Dividends paid
Retained earnings, 12/31

(950,000)
(310,000)
90,000
(1,170,000)

Seguros

Correct!

Cash
Receivables and inventory
Property, plantm and equipment
Investment in Seguros

86,000
750,000
1,400,000
1,062,500

Research and development asset

Goodwill
Trademarks
Total assets

300,000
3,598,500

160,000
885,000

Liabilities
Contingent performance obligation
Common stock
Additional paid-in capital
Retained earnings
Total liabilities and equities

(500,000)
(62,500)
(650,000)
(1,216,000)
(1,170,000)
(3,598,500)

(180,000)
(200,000)
(70,000)
(435,000)
(885,000)

Correct!

85,000
190,000
450,000
-

Correct!

COMMON SHARES
MARKET VALUE
USD
PAR VALUE
CASH
DISCOUNT RATE

50000
20
1,000,000.00
5

750,000.00
250,000.00

130,000.00
4%

Page 5

1225

[A]

[A]
[A]
[A]

[S]
[S]
[S]

P02-29
%
PVALUE=

50%
$62,500.00

TOTAL FAIR VALUE OF CONSIDERED TRANSFERRED

$1,062,500.00

A)

INVESTMENT IN SEGUROS (consideration transferred)

Contingent performance libility
Common Stock (50,000 shares issued at $5 par value)
Additional Paid-in Capital (value of shares in excess of par value)
* To record acquisition of Seguros, wich Maintains separate entity.

B)

Professional Services fee

Cash (paid for third-party fees)

C)
common Stock issuance costs
Cash

FAIR VALUE OF CONSIDERATION TRANSFERRED TO PACIFICA

BOOK VALUE AS OF DECEMBER 31, 2012
EXCESS OF FAIR VALUE OVER BOOK VALUE

Page 6

$1,062,500.00
$ 705,000.00
357,500.00

P02-29
ALLOCATIONS MADE TO SPECIFIC ACCOUNTS BASED ON ACQUISITION DATE
FAIR AND BOOK VALUE DIFFERENCES:
Receivables and inventory
(10,000.00)
Property, plant, and equipment
150,000.00
Trademarks
40,000.00
Reasearch & Development
100,000.00
EXCESS FAIR VALUE NOT IDENTIFIED WITH SPECIFIC ITEMS- GOODWILL

Page 7

280,000.00
77,500.00

P02-29

EGUROS CO.
rksheet
2012
Consolidation Entries
Debit

Credit

Consolidated
Totals
(1,200,000)
890,000
(310,000)
(950,000)
(310,000)
90,000
(1,170,000)
Correct!

[A]

10,000

[S]
[A]

705,000
357,500

150,000

100,000
77,500
40,000

200,000
70,000
435,000
1,072,500
Correct!

1,072,500
Correct!

171,000
930,000
2,000,000
-

Correct!

100,000
77,500
500,000
3,778,500

Correct!

(680,000)
(62,500)
(650,000)
(1,216,000)
(1,170,000)
(3,778,500)

Correct!

Correct!

Page 8

Correct!
Correct!
Correct!

Correct!
Correct!

Correct!
Correct!
Correct!
Correct!

P02-29

DR.
CR.
1,062,500.00
$62,500.00
250,000.00
750,000.00

15000
15000

9000
9000

Page 9

P02-29

Page 10

Given P02-29
Given Data P02-29:
Seguros Company outstanding voting shares
acquired by Pacifica Inc.
Pacifica Company's $5 par common stock issued
for acquisitionnumber of shares
Market value of Pacifica stock at acquisition date
Cash paid by Pacifica when Seguros meets certain goals
Fair value of Seguros R & D project
Profitability percentage needed for Seguros to meet goals
Discount rate used to represent time value of money
Legal fees paid by Pacifica in connection with acquisition
Stock issuance costs paid by Pacifica
Seguros Company fully amortized patentvalue

Revenues
Expenses
Net income
Retained earnings, 1/1/12
Net income
Dividends paid
Retained earnings, 12/31/12
Cash
Receivables and inventory
Property, plant, and equipment
Trademarks
Total assets
Liabilities
Common stock
Additional paid-in capital
Retained earnings
Total liabilities and equities

110,000
750,000
1,400,000
300,000
$ 2,560,000
$
(500,000)
(400,000)
(475,000)
(1,185,000)
$ (2,560,000)

$
$
$

$
$
$

50,000
20
130,000
100,000
50%
4%
15,000
9,000
30,000

Seguros Company
Book
Fair
Values
Values

Pacifica, Inc.
$ (1,200,000)
875,000
$
(325,000)
$
(950,000)
(325,000)
90,000
$ (1,185,000)
$

100%

$
$

85,000 $
190,000
450,000
160,000
885,000
(180,000) $
(200,000)
(70,000)
(435,000)
(885,000)

Page 11

85,000
180,000
600,000
200,000
(180,000)