financePratt Company obtained all of the outstanding shares of Spider, Inc., on December 31, 2021, for $495,000 cash. Pratt will operate Spider as a wholly owned subsidiary with a separate legal and accounting identity. Although many of Spider’s book values approximate fair values, several of its accounts have fair values that differ from book values. In addition, Spider has internally developed assets that remain unrecorded on its books. In calculating the acquisition price, Pratt assessed Spider’s fair and book value differences as follows:
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| | Book Values | Fair Values |
|-------------------------------------|:-----------:|:-----------:|
| Computer software |$ 20,000 | $70,000 |
| Equipment | 40,000 | 30,000 |
| Client contracts | –0– | 100,000 |
| In-process research and development | –0– | 40,000 |
| Notes payable | (60,000) | (65,000) |
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At December 31, 2021, the following financial information is available for consolidation (credit balances in parentheses):
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| | Pratt | Spider |
|--------------------------------------|:---------------:|:-------------:|
| Cash |$ 36,000 | $18,000 |
| Receivables | 116,000 | 52,000 |
| Inventory | 140,000 | 90,000 |
| Investment in Spider | 495,000 | –0– |
| Computer software | 210,000 | 20,000 |
| Buildings (net) | 595,000 | 130,000 |
| Equipment (net) | 308,000 | 40,000 |
| Client contracts | –0– | –0– |
| Goodwill | –0– | –0– |
|  Total assets | **$ 1,900,000** | **$350,000** |
| | | |
| Accounts payable |$ (88,000) | $(25,000) |
| Notes payable | (510,000) | (60,000) |
| Common stock | (380,000) | (100,000) |
| Additional paid-in capital | (170,000) | (25,000) |
| Retained earnings | (752,000) | (140,000) |
|  Total liabilities and equities | **$ 1,900,000** | **$ 350,000** |
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Prepare a consolidated balance sheet for Pratt and Spider as of December 31, 2021. 10th Edition•ISBN: 9780134700724Elliot Aronson, Robin M. Akert, Samuel R. Sommers, Timothy D. Wilson525 solutions
1st Edition•ISBN: 9781118414705David Besanko, Mark Shanley, Scott Schaefer215 solutions
6th Edition•ISBN: 9780078692512McGraw-Hill Education3,760 solutions
13th Edition•ISBN: 9780135225691 (1 more)Michael R Solomon449 solutions
