On January 1, 2018 Casey Corporation exchanged $3,282,000 cash for 100 percent o
ID: 2329681 • Letter: O
Question
On January 1, 2018 Casey Corporation exchanged $3,282,000 cash for 100 percent of the outstanding voting stock of Kennedy Corporation. Casey plans to maintain Kennedy as a wholly owned subsidiary with separate legal status and accounting information systems.
At the acquisition date, Casey prepared the following fair-value allocation schedule:
Immediately after closing the transaction, Casey and Kennedy prepared the following postacquisition balance sheets from their separate financial records.
Prepare an acquisition-date consolidated balance sheet for Casey Corporation and its subsidiary Kennedy Corporation. (Negative amounts should be indicated by a minus sign.)
Fair value of Kennedy (consideration transferred) $ 3,282,000 Carrying amount acquired 2,600,000 Excess fair value $ 682,000 to buildings (undervalued) $ 353,000 to licensing agreements (overvalued) (128,000 ) 225,000 to goodwill (indefinite life) $ 457,000Explanation / Answer
consolidated balancesheet as of january 2018 figures in$ figures in$ figures in$ Assets Company C company K Consolidated Cash 441000 174000 615000 Account receviable 1255000 323000 1578000 Inventory 1270000 992000 2262000 investment in K co* 3282000 0 0 (3282000-3282000) Building net* 5587500 1880000 7820500 (5587500+1880000+353000) licensing agreement* 0 3010000 2882000 0+3010000-128000) goodwill* 963500 0 1420500 (963500+457000) total assets 12799000 6379000 16578000 Laibilities Accounts payable 329000 399000 728000 long term Debt 3470000 3380000 6850000 Stockholders equity common stock 3000000 1000000 3000000 Additional paid in capital 0 500000 0 retained earnings 6000000 1100000 6000000 Total laibilities & stockholders equity 12799000 6379000 16578000 Therefore the consolidated balancesheet assets & laibilities & stockholders equity is equal to $16578000 * investment = the consolidated ivestment in K will have 0 net value amount invested by co C is alsoamount received by company S * Building = the undervalued amount of building of co K is also added for consolidated balance * lisensing fees = the overvalued amount of licensing agreement of co k is deducted for consolidated value goodwill= the consolidated amount of goodwill is the value for co C + the indefinite value reported for co K