Mendol Corporation purchased 100% of the common stock of Carbury Inc. on January
ID: 2470020 • Letter: M
Question
Mendol Corporation purchased 100% of the common stock of Carbury Inc. on January 2, 2014. Carnac's balance sheet on January 2, 2014 was as follows: Mendol Carbury Inc. Accounts receivable-net $ 720,000 $180,000 Inventory 1,440,000 360,000 Land 160,000 40,000 Building-net 240,000 60,000 Equipment-net 320,000 80,000 Equity Investment 560,000 Total Assets $ 3,440,000 $720,000 Current liabilities $ 280,000 $70,000 Long term debt 640,000 160,000 Common stock ($1 par) 80,000 20,000 Paid-in capital 1,720,000 430,000 Retained earnings 720,000 40,000 Total Liabilities & Equity $ 3,440,000 $720,000 Fair values agree with book values except for inventory, land, and equipment that have fair values of $400,000, $50,000 and $70,000, respectively. Carbury has unrecorded patent rights valued at $20,000. Required: a. Prepare a schedule to allocate the purchase price to Carbury's assets and liabilities assuming Mendol paid $560,000 cash for the acquisition. b. Prepare the consolidation worksheet with entries for a January 2, 2014 consolidated balance sheet.
Explanation / Answer
Inventory A/C dr. 40000 Land A/C dr. 10000 patent 20000 To P& L on revaluation of Assets 70000 P& L on Revaluation on Assest 10000 To Equipment 10000 Consolidated Balance Sheet Liabilties Amt. Assets Amt. Current Liabilties 350,000 AR 900,000 Long Term Debt 800,000 Inventory 1,840,000 Common Stock 100,000 Land 210,000 Paid in Capital 2,150,000 Building 300,000 Retained Earning 760,000 Equipment 390,000 P& L on revaluation on Assets 60,000 Cash 560,000 Patent 20,000 4,220,000 4,220,000