Question

On January 1, 2018 Casey Corporation exchanged $3,252,000 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: Fair value of Kennedy (consideration transferred) $ 3,252,000 Carrying amount acquired 2,600,000 Excess fair value $ 652,000 to buildings (undervalued) $ 331,000 to licensing agreements (overvalued) (152,000 ) 179,000 to goodwill (indefinite life) $ 473,000 Immediately after closing the transaction, Casey and Kennedy prepared the following postacquisition balance sheets from their separate financial records. Accounts Casey Kennedy Cash $ 500,000 $ 155,250 Accounts receivable 1,430,000 322,000 Inventory 1,415,000 214,750 Investment in Kennedy 3,252,000 0 Buildings (net) 5,902,500 2,340,000 Licensing agreements 0 2,830,000 Goodwill 291,500 0 Total assets $ 12,791,000 $ 5,862,000 Accounts payable $ (311,000 ) $ (462,000 ) Long-term debt (3,480,000 ) (2,800,000 ) Common stock (3,000,000 ) (1,000,000 ) Additional paid-in capital 0 (500,000 ) Retained earnings (6,000,000 ) (1,100,000 ) Total liabilities and equities $ (12,791,000 ) $ (5,862,000 ) Prepare an acquisition-date consolidated balance sheet for Casey Corporation and its subsidiary Kennedy Corporation. (Negative amounts should be indicated by a minus sign.)

Answer 1

Answer Page No Acquisition date cemolidated balance sheet In the consolidated balance sheet, * Investment in k is to because diete buted carrying amount acquired for $ 2600,000 & the excess fair value for $652.000. * The balances of common stock , additional quid in capital € retained earnings isfonds as balance of parent company only. * The building (net) % Calculated by adding account balances of both the companies along with the addition of $ 331000 for undewalued fair value of buildings * The Licensing agreement Calculated by adding account bala shes of the both the companies along with deduction of #152000 for overvalued fair value of building

$1629750 Page: No @ * Goodwill is calculated by adding subsidiary company goodari for $ 443000 derived using allocation schedule, to the goodwill of parent company for $291500 Adjustments e, eliminations Consolidated Description Debit I Credit totals cash $500,000 $ 155250 $655250 Account receivable $1430,000 $322000 $1752000 Inventory #1415000 $ 214750 Investment in a $3252000 $ 0 $2600,000) - $652008 $0 Building (net) $5902500*2340,000 $331000W 48543500 Licensing agreement $o $2830,000 $1500001 $ 2648000 Goodwill $291500 0 $44300CC) $ 764500 Tobal assets #12791,000 4 5862000 $16053000 Acousto payable (#311000)|(4 462000) (4943000) Long term debb ($ 3480,00) († 2800,000) ($6280,000) common stock (4 3000.000) (1000,00) $1000,0008 ( 3000,000) Additional paid in so $ 500,000 $500,000 - Capital Rebained earnings ($6000,000X #1100,000) $110010009 ($ 6000,000) intal liabilities & equity $ 12791000 $5862000 $16053000