Plaza, Inc., acquires 80 percent of the outstanding common stock of Stanford Cor

Question

Plaza, Inc., acquires 80 percent of the outstanding common stock of Stanford Corporation on January 1, 2018, in exchange for $912,900 cash. At the acquisition date, Stanford’s total fair value, including the noncontrolling interest, was assessed at $1,141,125. Also at the acquisition date, Stanford's book value was $524,500.

Several individual items on Stanford’s financial records had fair values that differed from their book values as follows:

For internal reporting purposes, Plaza, Inc., employs the equity method to account for this investment. The following account balances are for the year ending December 31, 2018, for both companies.

At year-end, there were no intra-entity receivables or payables.

Prepare a worksheet to consolidate the financial statements of Plaza, Inc. and its subsidiary Stanford.

Book Value Fair Value Tradenames (indefinite life) $ 286,700 $ 350,700 Property and equipment (net, 8-year remaining life) 231,200 248,800 Patent (14-year remaining life) 113,300 146,900

Explanation / Answer

Income Statement :-

Balance Sheet :-

Retained earnings :-

Particulars Plaza inc. Stanford Corp. Debit Credit Consoldiated Total Revenues $755900 $746500 $1502400 Cost of Goods Sold ($417900) ($315500) ($733400) Gross Profit $338000 $431000 $769000 Dep. Expense ($177100) ($28900) ($206000) Amortization Exp. ($22500) ($22500) Equity in Stanford $300000 $300000 Net Income $460900 $379600 $540500

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