Question

11,0 26 On January 1, 2021, James Corporation exchanged $3,050,000 cash for 100 percent of the outstanding voting stock of Johnson Corporation James plans to maintain Johnson as a wholly owned subsidiary with separate legal status and accounting information systems At the acquisition date, James prepared the following fair value allocation schedule: Consideration transferred for Johnson Corporation Johnson's carrying amount $3,050,000 Less: Johnson's pre-existing goodwill $2,300,000 Identifiable not assets carrying amount (75000) Excess consideration transferred over carrying amount of identifiable net assets 2,225,000 to Johnson's patents (undervalued) $ 825,000 800.000 to now goodwill from Johnson acquisition (indefinite life) $ 25,000 Immediately after closing the transaction, James and Johnson prepared the following postacquisition balance sheets from their separate financial records Accounts James Johnson Cash $ 245,000 $ 110,000 Accounts receivable 1,830,000 360,000 3,500,000 280,000 Inventory 3,050,000 Investment in Johnson 7,000,000 1,000,000 Patents 3.200.000 Trademarks 150 000 75 000 Goodwill $ 15,775 000 $ 5.025 000 Total assets $ (100 000) $ (515,000 Accounts payable Аа ta

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On January 1, 2021, James Corporation exchanged $3,050,000 cash for 100 percent of the outstanding voting stock of Johnson Corporation. James plans to maintain Johnson as a wholly owned subsidiary with separate legal status and accounting information systems.

At the acquisition date, James prepared the following fair-value allocation schedule:

Consideration transferred for Johnson Corporation		$3,050,000
Johnson’s carrying amount	$2,300,000
Less: Johnson’s pre-existing goodwill	(75,000)
Identifiable net assets carrying amount		2,225,000
Excess consideration transferred over carrying amount of identifiable net assets		$  825,000
to Johnson’s patents (undervalued)		800,000
to new goodwill from Johnson acquisition (indefinite life)		$  25,000

Immediately after closing the transaction, James and Johnson prepared the following postacquisition balance sheets from their separate financial records.

Accounts	James	Johnson
Cash	$  245,000	$ 110,000
Accounts receivable	1,830,000	360,000
Inventory	3,500,000	280,000
Investment in Johnson	3,050,000	–0–
Patents	7,000,000	1,000,000
Trademarks	–0–	3,200,000
Goodwill	150,000	75,000
Total assets	$ 15,775,000	$ 5,025,000
Accounts payable	$  (100,000)	$  (515,000)
Long-term debt	(4,300,000)	(2,210,000)
Common stock	(5,000,000)	(1,000,000)
Additional paid-in capital	–0–	(200,000)
Retained earnings	(6,375,000)	(1,100,000)
Total liabilities and equities	$(15,775,000)	$(5,025,000)

Prepare an acquisition-date consolidated balance sheet for James Corporation and its subsidiary Johnson Corporation.

Answer 1

When 100% voting stock sold to independent party

Consolidated Balance Sheet of James Corporation and its subsidiary Johnson Corporation

as on 1st January, 2021

Particulars

Note No.

$ Amount

I Assets		-
1) Non- Current Assets
a) Property, Plant & Equiptment		-
b) Goodwill	1	175,000
c) Patent	2	8,800,000
d) Trademark	3	3,200,000
2) Current Assets
a) Inventories	4	3,780,000
b) Account Receivables	5	2,190,000
c) Cash & cash equivalents	6	355,000
Total Assets		18,500,000
II Equity and Liabilities
1) Common Stock	7	5,000,000
2) Additional paid-in Capital		-
3) Retained Earnings	8	6,375,000
Non Current Liabilities
Long term Debt	9	6,510,000
Current Liabilities
Account Payables	10	615,000
Total Liabilities		18,500,000

Notes to Accounts

1) Goodwill

James Corporation	150,000
New Goodwill from Johnson Corporation (Given)	25,000
Total	175,000

2) Patents

James Corporation	7,000,000
Johnson Corporation	1,000,000
Add: Undervalued patents	800,000
Total	8,800,000

3) Trademark

James Corporation	-
Johnson Corporation	3,200,000

4) Inventory

James Corporation	3,500,000
Johnson Corporation	280,000
Total	3,780,000

5) Account Receivables

James Corporation	1,830,000
Johnson Corporation	360,000
Total	2,190,000

6) Cash & Cash equivalents

James Corporation	245,000
Johnson Corporation	110,000
Total	355,000

7) Common Stock

James Corporation	5,000,000
Johnson Corporation	-
Total	5,000,000

8) Retained Earnings

James Corporation	6,375,000
Johnson Corporation	-
Total	6,375,000

9) Long Term Debts

James Corporation	4,300,000
Johnson Corporation	2,210,000
Total	6,510,000

10) Account Payables

James Corporation	100,000
Johnson Corporation	515,000
Total	615,000