On January 1, 2024, Presidio Company acquired 100 percent of the outstanding common stock of Mason Company. To acquire these shares, Presidio issued to the owners of Mason $200,000 in long-term liabilities and 20,000 shares of common stock having a par value of $1 per share but a fair value of $10 per share. Presidio paid $30,000 to accountants, lawyers, and brokers for assistance in the acquisition and another $12,000 in connection with stock issuance costs. Prior to these transactions, the balance sheets for the two companies were as follows: Cash Receivables Inventory Land Buildings (net) Equipment (net) Accounts payable Long-term liabilities Common stock-$1 par value Common stock-$20 par value Additional paid-in capital Retained earnings, 1/1/24 Note: Parentheses indicate a credit balance. Presidio Company $ 60,000 270,000 360,000 200,000 420,000 160,000 (150,000) (430,000) (110,000) (360,000) (420,000) Mason Company $ 20,000 90,000 140,000 180,000 220,000 50,000 (40,000) (200,000) (120,000) -0- (340,000) Presidio's appraisal of Mason's fair values deemed three accounts to be undervalued: Inventory by $5,000, Land by $20,000, and Buildings by $30,000. Presidio plans to maintain Mason's separate legal identity and to operate Mason as a wholly owned subsidiary. Page 85 a. Prepare Presidio's journal entries to record its acquisition of Mason, related professional fees paid, and stock acquisition costs. b. Separately determine each individual amount that Presidio Company would report in its consolidated balance sheet following the acquisition of Mason. Include in Presidio's retained earnings any adjustments to income accounts from part (a). c. To verify the answers found in part (b), adjust Presidio's column of accounts for the journal entries in part (a) and then prepare a worksheet to consolidate the balance sheets of these two companies at the acquisition date.
On January 1, 2024, Presidio Company acquired 100 percent of the outstanding common stock of Mason Company. To acquire these shares, Presidio issued to the owners of Mason $200,000 in long-term liabilities and 20,000 shares of common stock having a par value of $1 per share but a fair value of $10 per share. Presidio paid $30,000 to accountants, lawyers, and brokers for assistance in the acquisition and another $12,000 in connection with stock issuance costs. Prior to these transactions, the balance sheets for the two companies were as follows: Cash Receivables Inventory Land Buildings (net) Equipment (net) Accounts payable Long-term liabilities Common stock-$1 par value Common stock-$20 par value Additional paid-in capital Retained earnings, 1/1/24 Note: Parentheses indicate a credit balance. Presidio Company $ 60,000 270,000 360,000 200,000 420,000 160,000 (150,000) (430,000) (110,000) (360,000) (420,000) Mason Company $ 20,000 90,000 140,000 180,000 220,000 50,000 (40,000) (200,000) (120,000) -0- (340,000) Presidio's appraisal of Mason's fair values deemed three accounts to be undervalued: Inventory by $5,000, Land by $20,000, and Buildings by $30,000. Presidio plans to maintain Mason's separate legal identity and to operate Mason as a wholly owned subsidiary. Page 85 a. Prepare Presidio's journal entries to record its acquisition of Mason, related professional fees paid, and stock acquisition costs. b. Separately determine each individual amount that Presidio Company would report in its consolidated balance sheet following the acquisition of Mason. Include in Presidio's retained earnings any adjustments to income accounts from part (a). c. To verify the answers found in part (b), adjust Presidio's column of accounts for the journal entries in part (a) and then prepare a worksheet to consolidate the balance sheets of these two companies at the acquisition date.
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter13: Investments And Long-term Receivables
Section: Chapter Questions
Problem 8MC
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Transcribed Image Text:29. On January 1, 2024, Presidio Company acquired 100 percent of the outstanding common stock of Mason Company. To acquire these
shares, Presidio issued to the owners of Mason $200,000 in long-term liabilities and 20,000 shares of common stock having a par value of
$1 per share but a fair value of $10 per share. Presidio paid $30,000 to accountants, lawyers, and brokers for assistance in the acquisition
and another $12,000 in connection with stock issuance costs.
Prior to these transactions, the balance sheets for the two companies were as follows:
Cash
Receivables
Inventory
Land
Buildings (net)
Equipment (net)
Accounts payable
Long-term liabilities
Common stock-$1 par value
Common stock-$20 par value
Additional paid-in capital
Retained earnings, 1/1/24
Note: Parentheses indicate a credit balance.
Presidio Company
$ 60,000
270,000
360,000
200,000
420,000
160,000
(150,000)
(430,000)
(110,000)
(360,000)
(420,000)
Mason Company
$ 20,000
90,000
140,000
180,000
220,000
50,000
(40,000)
(200,000)
(120,000)
-0-
(340,000)
Presidio's appraisal of Mason's fair values deemed three accounts to be undervalued: Inventory by $5,000, Land by $20,000, and Buildings
by $30,000. Presidio plans to maintain Mason's separate legal identity and to operate Mason as a wholly owned subsidiary.
Page 85
a. Prepare Presidio's journal entries to record its acquisition of Mason, related professional fees paid, and stock acquisition costs.
b. Separately determine each individual amount that Presidio Company would report in its consolidated balance sheet following the
acquisition of Mason. Include in Presidio's retained earnings any adjustments to income accounts from part (a).
c. To verify the answers found in part (b), adjust Presidio's column of accounts for the journal entries in part (a) and then prepare a
worksheet to consolidate the balance sheets of these two companies at the acquisition date.
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