Following are preacquisition financial balances for Parrot Company and Sun Compa
ID: 2347356 • Letter: F
Question
Following are preacquisition financial balances for Parrot Company and Sun Company as of December 31. Also included are fair values for Sun Company accounts.Parrot comp. sun company
Book value book value fair value
cash 290,000 120,000 120,000
receivables 220,000 300,000 300,000
inventory 410,000 210,000 260,000
land 600,000 130,000 110,000
building and equipment 600,000 270,000 330,000
franchise agreements 220,000 190,000 220,000
accounts payable (190,000) (120,000) (120,000)
accrued expenses (90,000) (30,000) (30,000)
long-term liabilities (900,000) (510,000) (510,000)
common stock- 20 par (660,000)
common stock- 5 par (210,000)
additional paid (70,000) (90,000)
retained earnings, 1/1 (390,000) (240,000)
revenues (960,000) (330,000)
expenses 920,000 310,000
On December 31, Parrot acquires Sun's outstanding stock by paying $360,000 in cash and issuing 10,000 shares of its own common stock with a value of $40 per share. Parrot paid legal and accounting fees of $20,000 as well as $5,000 in stock issuance costs.
In the following situations, determine the value that would be shown in consolidated financial statements for each of the accounts listed.
Inventory
Revenues
Revenues
Additional paid-in capital
Buildings and equipment
Expenses
Franchise agreements
Retained earnings, 1/1
Goodwill
Explanation / Answer
Inventory $410,000 + $260,000 $670,000
Revenues $960,000
Additional paid-in capital $70,000 - $5,000 $65,000
Buildings and equipment $600,000 + $330,000 $930,000
Expenses $920,000 + $20,000 $940,000
Franchise agreements $220,000 + $220,000 $440,000
Retained earnings, 1/1 $390,000
Goodwill
Net assets at fair value $120,000+300,000+260,000
+110,000+330,000+220,000-120,000-30,000
-510,000 $680,000
Less : Paid Cash ($360,000)
Less : Common Stock ($400,000) $80,000