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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)

Common stock$1 par value(110,000)


Common stock$20 par value(120,000)
Additional paid-in capital(360,000)
Retained earnings, 1/1/13(424,000)

0
(366,000)

________________________________________

Note: Parentheses indicate a credit balance.

In Marshalls appraisal of Tucker, it deemed three accounts to be undervalued on the subsidiarys


books: Inventory by $5,800, Land by $25,050, and Buildings by $39,600. Marshall plans to maintain
Tuckers separate legal identity and to operate Tucker as a wholly owned subsidiary.

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.)

Problem 2-24 [LO4, LO5, LO7, LO8]


Pratt Company acquired all of Spider, Inc.s outstanding shares on December 31, 2013, for $478,050
cash. Pratt will operate Spider as a wholly owned subsidiary with a separate legal and accounting
identity. Although many of Spiders 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 Spiders fair and
book value differences as follows:

Book
ValuesFair
Values
Computer software$49,500
Equipment55,500

36,400

Client contracts0

105,000

$88,500

In-process research and development0

29,750

Notes payable(104,000) (112,850)


________________________________________

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.)