Part 2: Problem Solving - Journal Using the data in the Option 1 Spreadsheet (li
ID: 2478194 • Letter: P
Question
Part 2: Problem Solving - Journal
Using the data in the Option 1 Spreadsheet (linked at the bottom of the page), perform the accounting required for the acquisition of Little, Inc. by Big, Inc. Within the worksheet, you are to:
Complete the consolidation worksheet
Prepare the consolidated balance sheet in good form
Assume that Big Company decides to acquire 100% of Little Company for $200,000. Prepare the consolidated balance sheet and any supporting worksheets. Big Company Balance Sheet Assets, Liabilities & Equities Book Value Cash $500,000 AR $10,000 Inventory $50,000 Land $40,000 PP&E $400,000 Accumulated Depreciation -$150,000 Patent $0 Total Assets $850,000 AP $110,000 Common Stock $395,000 Additional Paid In Capital $300,000 Retained Earnings $45,000 Total Liabilities & Equity $850,000 Little Company Balance Sheet Assets, Liabilities & Equities Book Value Cash $35,000 AR $10,000 Inventory $65,000 Land $40,000 PP&E $40,000 Accumulated Depreciation -$5,000 Patent $0 Total Assets $185,000 AP $25,000 Common Stock $25,000 Additional Paid In Capital $35,000 Retained Earnings $100,000 Total Liabilities & Equity $185,000 Assume that Fair Value of all noncash assets are 25% greater than book value Assume that Big Company decides to acquire 100% of Little Company for $200,000. Prepare the consolidated balance sheet and any supporting worksheets. Big Company Worksheet Assets, Liabilities & Equities Cash AR Inventory Land PP&E Accumulated Depreciation Goodwill Patent Total Assets AP Common Stock Additional Paid In Capital Retained Earnings Total Liabilities & Equity Prepare the Consolidated Balance Sheet in the area below Big Company Balance Sheet Assets, Liabilities & Equities Cash AR Inventory Land PP&E Accumulated Depreciation Patent Total Assets AP Common Stock Additional Paid In Capital Retained Earnings Total Liabilities & EquityExplanation / Answer
Calculation of goodwill/capital reserve at the acquisiton of Little Co. is as under: Cash $ 35,000 AR $ 10,000 Inventory $ 65,000 Land (+25%) $ 50,000 PP&E (125%) $ 50,000 Accum.Dep. $ (5,000) Less: AP $ (25,000) Consideration $ 180,000 Goodwill=Book value of assets and liabilities-Consideration Book value of assets Cash $ 35,000 AR $ 10,000 Inventory $ 65,000 Land $ 40,000 PP&E $ 40,000 Accum.Dep. $ (5,000) Less: AP $ (25,000) Book value of assets $ 160,000 Good will: Consideration $ 180,000 Less:Book value of assets $ (160,000) Goodwill $ 20,000 Big Company Consolidated balance sheet Cash $ 355,000 AR $ 20,000 Inventory $ 115,000 Land $ 80,000 PP&E $ 440,000 Less: Acc.Dep $ (155,000) Goodwill $ 20,000 Patent $ - Total Assets $ 875,000 AP $ 135,000 Common stock $ 395,000 Additional paid in capital $ 300,000 Retained earnings $ 45,000 Total Liabiliites and Equity $ 875,000 Cash=$500,000+$35,000-$180,000=$355,000 All assets and liabilities in the consolidated balance sheet are computed by adding book values of big company and book values of Little company.