Accounting homework help

For this assignment, use your Fundamentals of Advanced Accounting text and the Excel spreadsheet provided on the companion website (linked in Resources) to complete the following:

● Problem 29 on page 82. This problem tests your knowledge of financial statement reporting for consolidated companies. In the spreadsheet, use tab P02-29 for your answers.

Pratt Company acquired all of Spider, Inc.’s outstanding shares on December 31, 2018, for $495,000 cash. Pratt will operate Spider as a wholly owned subsidiary with a separate legal and accounting identity. Although many of Spider’s book values approximate fair values, several of its accounts have fair values that differ from book values. In addition, Spider has internally developed assets that remain unrecorded on its books. In deriving the acquisition price, Pratt assessed Spider’s fair and book value differences as follows:

 

Book Values

Fair Values

 

Computer software

 

$ 20,000

$ 70,000

 

Equipment

 

40,000

30,000

 

Client contracts

 

–0–

100,000

 

In-process research and   development

 

–0–

40,000

 

Notes payable

 

(60,000)

(65,000)

At December 31, 2018, the following financial information is available for consolidation:

 

 

Pratt

 

Spider

 

Cash

 

$    36,000

$      18,000

 

Receivables

 

116,000

52,000

 

Inventory

 

140,000

90,000

 

Investment in Spider

 

495,000

–0–

 

Computer software

 

210,000

20,000

 

Buildings (net)

 

595,000

130,000

 

Equipment (net)

 

308,000

40,000

 

Client contracts

 

–0–

–0–

 

Goodwill

 

       –0–

      –0–

 

Total assets

 

$  1,900,000

$  350,000

 

Accounts payable

 

$    (88,000)

$   (25,000)

 

Notes payable

 

(510,000)

(60,000)

 

Common stock

 

(380,000)

(100,000)

 

Additional paid-in capital

 

(170,000)

(25,000)

 

Retained earnings

 

   (752,000)

  (140,000)

 

Total liabilities and   equities

 

$(1,900,000)

$(350,000)

Prepare a consolidated balance sheet for Pratt and Spider as of December 31, 2018.

___________________________________________________________________________________

 

Problem 33 on page 84. This problem tests your application of the statutory merger method for business combinations.

On January 1, NewTune Company exchanges 15,000 shares of its common stock for all of the outstanding shares of On-the-Go, Inc. Each of NewTune’s shares has a $4 par value and a $50 fair value. The fair value of the stock exchanged in the acquisition was considered equal to On-the-Go’s fair value. NewTune also paid $25,000 in stock registration and issuance costs in connection with the merger.

Several of On-the-Go’s accounts’ fair values differ from their book values on this date:

 

Book Values

Fair Values

 

Receivables

 

$  65,000

$   63,000

 

Trademarks

 

95,000

225,000

 

Record music catalog

 

60,000

180,000

 

In-process research and development

 

–0–

200,000

 

Notes payable

 

(50,000)

(45,000)

Precombination book values for the two companies are as follows:

 

 

NewTune

On-the-Go

 

Cash

 

$    60,000

$     29,000

 

Receivables

 

150,000

65,000

 

Trademarks

 

400,000

95,000

 

Record music catalog

 

840,000

60,000

 

Equipment (net)

 

    320,000

    105,000

 

Totals

 

$  1,770,000

$  354,000

 

Accounts payable

 

$ (110,000)

$   (34,000)

page 85

 

Notes payable

 

(370,000)

(50,000)

 

Common stock

 

(400,000)

(50,000)

 

Additional paid-in capital

 

(30,000)

(30,000)

 

Retained earnings

 

   (860,000)

   (190,000)

 

Totals

 

$(1,770,000)

$(354,000)

a.
Assume that this combination is a statutory merger so that On-the-Go’s accounts will be transferred to the records of NewTune. On-the-Go will be dissolved and will no longer exist as a legal entity. Prepare a postcombination balance sheet for NewTune as of the acquisition date.

b. Assume that no dissolution takes place in connection with this combination. Rather, both companies retain their separate legal identities. Prepare a worksheet to consolidate the two companies as of the combination date.

c. How do the balance sheet accounts compare across parts (a) and (b)?

  • attachment

    4063unit2.docx
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    4063u2a2.docx

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