Pratt Company acquired all of the outstanding shares of Spider, Inc., on December 31, 2021, for $461,700 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 $ 33,000 $ 74,000 Equipment 82,000 62,600 Client contracts 0 118,000 In-process research and development 0 24,000 Notes payable (71,500 ) (78,400 ) At December 31, 2021, the following financial information is available for consolidation (credit balances in parentheses): Pratt Spider Cash $ 23,750 $ 15,000 Receivables 136,000 47,000 Inventory 189,000 60,500 Investment in Spider 461,700 0 Computer software 233,500 33,000 Buildings (net) 605,750 142,500 Equipment (net) 347,000 82,000 Client contracts 0 0 Goodwill 0 0 Total assets $ 1,996,700 $ 380,000 Accounts payable $ (88,200 ) $ (38,500 ) Notes payable (529,500 ) (71,500 ) Common stock (380,000 ) (100,000 ) Additional paid-in capital (170,000 ) (25,000 ) Retained earnings (829,000 ) (145,000 ) Total liabilities and equities $ (1,996,700 ) $ (380,000 ) Prepare a consolidated balance sheet for Pratt and Spider as of December 31, 2021.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Pratt Company acquired all of the outstanding shares of Spider, Inc., on December 31, 2021, for $461,700 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	$	33,000		$	74,000
Equipment		82,000			62,600
Client contracts		0			118,000
In-process research and development		0			24,000
Notes payable		(71,500	)		(78,400	)

At December 31, 2021, the following financial information is available for consolidation (credit balances in parentheses):

	Pratt		Spider
Cash	$	23,750		$	15,000
Receivables		136,000			47,000
Inventory		189,000			60,500
Investment in Spider		461,700			0
Computer software		233,500			33,000
Buildings (net)		605,750			142,500
Equipment (net)		347,000			82,000
Client contracts		0			0
Goodwill		0			0
Total assets	$	1,996,700		$	380,000
Accounts payable	$	(88,200	)	$	(38,500	)
Notes payable		(529,500	)		(71,500	)
Common stock		(380,000	)		(100,000	)
Additional paid-in capital		(170,000	)		(25,000	)
Retained earnings		(829,000	)		(145,000	)
Total liabilities and equities	$	(1,996,700	)	$	(380,000	)

Prepare a consolidated balance sheet for Pratt and Spider as of December 31, 2021.

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