On December 31, Phoenix Corporation acquired all of Sedona Corporation’s voting stock in exchange for $560,000 cash. At the acquisition date, the fair values of Sedona’s assets and liabilities equaled their carrying values, except that the fair value of the inventory was $20,000 lower than the carrying value, the fair value of the equipment was $50,000 higher than the carrying value, and the fair value of the long-term debt was $4,000 lower than the carrying value. The separate condensed balance sheets of the two companies immediately after the acquisition (on 12/31) are as follows: Phoenix Sedona Cash $ 90,000 $ 60,000 Accounts receivable 130,000 25,000 Inventory 160,000 70,000 Plant and equipment (net) 470,000 275,000 Investment in Sedona 560,000 . Total assets $1,410,000 $ 430,000 Accounts payable $ 170,000 $ 85,000 Long-term debt 150,000 55,000 Common stock ($10 par) and APIC 330,000 70,000 Retained earnings 760,000 220,000 Total liabilities and shareholders’ equity $1,410,000 $ 430,000 In the two firms’ consolidated balance sheet of 12/31, at what amount should each of the following items be reported: a) Goodwill: _______________ b) Total shareholders’ equity: _______ c) Inventory: ____ d) Total assets: ____ Had Phoenix’s acquisition cost for Sedona been $320,000 rather than $560,000, at what amount would Phoenix report as “Investment in Sedona” in its balance sheet at 12/31?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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On December 31, Phoenix Corporation acquired all of Sedona Corporation’s voting stock in exchange for $560,000 cash. At the acquisition date, the fair values of Sedona’s assets and liabilities equaled their carrying values, except that the fair value of the inventory was $20,000 lower than the carrying value, the fair value of the equipment was $50,000 higher than the carrying value, and the fair value of the long-term debt was $4,000 lower than the carrying value.   The separate condensed balance sheets of the two companies immediately after the acquisition (on 12/31) are as follows:

                                                                                 Phoenix   Sedona

         Cash                                                            $ 90,000   $   60,000

         Accounts receivable                                    130,000   25,000

         Inventory                                                    160,000   70,000

         Plant and equipment (net)                           470,000          275,000

         Investment in Sedona                                 560,000                   .

         Total assets                                                 $1,410,000  $ 430,000

 

         Accounts payable                                        $   170,000  $   85,000

         Long-term debt                                           150,000  55,000

         Common stock ($10 par) and APIC           330,000      70,000

         Retained earnings                                        760,000    220,000

         Total liabilities and shareholders’ equity   $1,410,000  $ 430,000

 

  1. In the two firms’ consolidated balance sheet of 12/31, at what amount should each of the following items be reported:

 

  1. a) Goodwill: _______________
  2. b) Total shareholders’ equity: _______
  3. c) Inventory: ____
  4. d) Total assets: ____

 

  1. Had Phoenix’s acquisition cost for Sedona been $320,000 rather than $560,000, at what amount would Phoenix report as “Investment in  Sedona” in its balance sheet at 12/31? 

Answer: __________



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