On January 1, 2021, Marshall Company acquired 100 percent of the outstanding common stock of Tucker Company. To acquire these shares, Marshall issued $318,000 in long-term liabilities and 20,000 shares of common stock having a par value of $1 per share but a fair value of $10 per share. Marshall paid $25,000 to accountants, lawyers, and brokers for assistance in the acquisition and another $10,000 in connection with stock issuance costs. Prior to these transactions, the balance sheets for the two companies were as follows: Marshall Company Book Value Tucker Company Book Value Cash $ 71,700 $ 39,800 Receivables 290,000 150,000 Inventory 432,000 225,000 Land 285,000 240,000 Buildings (net) 475,000 252,000 Equipment (net) 174,000 64,800 Accounts payable (229,000 ) (58,500 ) Long-term liabilities (517,000 ) (318,000 ) Common stock—$1 par value (110,000 ) Common stock—$20 par value (120,000 ) Additional paid-in capital (360,000 ) 0 Retained earnings, 1/1/21 (511,700 ) (475,100 ) Note: Parentheses indicate a credit balance. In Marshall’s appraisal of Tucker, it deemed three accounts to be undervalued on the subsidiary’s books: Inventory by $8,350, Land by $25,000, and Buildings by $41,000. Marshall plans to maintain Tucker’s separate legal identity and to operate Tucker as a wholly owned subsidiary. Determine the amounts that Marshall Company would report in its postacquisition consolidated balance sheet. In preparing the postacquisition balance sheet, any required adjustments to income accounts from the acquisition should be closed to Marshall’s retained earnings. Other accounts will also need to be added or adjusted to reflect the journal entries Marshall prepared in recording the acquisition. To verify the answers found in part (a), prepare a worksheet to consolidate the balance sheets of these two companies as of January 1, 2021.

On January 1, 2021, Marshall Company acquired 100 percent of the outstanding common stock of Tucker Company. To acquire these shares, Marshall issued $318,000 in long-term liabilities and 20,000 shares of common stock having a par value of $1 per share but a fair value of $10 per share. Marshall paid $25,000 to accountants, lawyers, and brokers for assistance in the acquisition and another $10,000 in connection with stock issuance costs. Prior to these transactions, the balance sheets for the two companies were as follows: Marshall Company Book Value Tucker Company Book Value Cash $ 71,700 $ 39,800 Receivables 290,000 150,000 Inventory 432,000 225,000 Land 285,000 240,000 Buildings (net) 475,000 252,000 Equipment (net) 174,000 64,800 Accounts payable (229,000 ) (58,500 ) Long-term liabilities (517,000 ) (318,000 ) Common stock—$1 par value (110,000 ) Common stock—$20 par value (120,000 ) Additional paid-in capital (360,000 ) 0 Retained earnings, 1/1/21 (511,700 ) (475,100 ) Note: Parentheses indicate a credit balance. In Marshall’s appraisal of Tucker, it deemed three accounts to be undervalued on the subsidiary’s books: Inventory by $8,350, Land by $25,000, and Buildings by $41,000. Marshall plans to maintain Tucker’s separate legal identity and to operate Tucker as a wholly owned subsidiary. Determine the amounts that Marshall Company would report in its postacquisition consolidated balance sheet. In preparing the postacquisition balance sheet, any required adjustments to income accounts from the acquisition should be closed to Marshall’s retained earnings. Other accounts will also need to be added or adjusted to reflect the journal entries Marshall prepared in recording the acquisition. To verify the answers found in part (a), prepare a worksheet to consolidate the balance sheets of these two companies as of January 1, 2021.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Prior to these transactions, the balance sheets for the two companies were as follows:

	Marshall Company Book Value		Tucker Company Book Value
Cash	$	71,700		$	39,800
Receivables		290,000			150,000
Inventory		432,000			225,000
Land		285,000			240,000
Buildings (net)		475,000			252,000
Equipment (net)		174,000			64,800
Accounts payable		(229,000	)		(58,500	)
Long-term liabilities		(517,000	)		(318,000	)
Common stock—$1 par value		(110,000	)
Common stock—$20 par value					(120,000	)
Additional paid-in capital		(360,000	)		0
Retained earnings, 1/1/21		(511,700	)		(475,100	)

Note: Parentheses indicate a credit balance.

In Marshall’s appraisal of Tucker, it deemed three accounts to be undervalued on the subsidiary’s books: Inventory by $8,350, Land by $25,000, and Buildings by $41,000. Marshall plans to maintain Tucker’s separate legal identity and to operate Tucker as a wholly owned subsidiary.

Determine the amounts that Marshall Company would report in its postacquisition consolidated balance sheet. In preparing the postacquisition balance sheet, any required adjustments to income accounts from the acquisition should be closed to Marshall’s retained earnings. Other accounts will also need to be added or adjusted to reflect the journal entries Marshall prepared in recording the acquisition.
To verify the answers found in part (a), prepare a worksheet to consolidate the balance sheets of these two companies as of January 1, 2021.

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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