Pratt Company acquired all of Spider, Inc.’s outstanding shares
on December 31, 2018, for $515,300 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 deriving the acquisition
price, Pratt assessed Spider’s fair and book value differences as
follows:
|
Book Values |
|
Fair Values |
| Computer software |
$ |
40,000 |
|
|
$ |
76,000 |
|
| Equipment |
|
86,000 |
|
|
|
71,100 |
|
| Client contracts |
|
0 |
|
|
|
112,400 |
|
| In-process research and development |
|
0 |
|
|
|
34,750 |
|
| Notes payable |
|
(95,000 |
) |
|
|
(103,450 |
) |
|
At December 31, 2018, the following financial information is
available for consolidation:
|
Pratt |
|
Spider |
| Cash |
$ |
31,950 |
|
|
$ |
17,100 |
|
| Receivables |
|
141,000 |
|
|
|
62,900 |
|
| Inventory |
|
183,500 |
|
|
|
106,000 |
|
| Investment in Spider |
|
515,300 |
|
|
|
0 |
|
| Computer software |
|
213,000 |
|
|
|
40,000 |
|
| Buildings (net) |
|
513,000 |
|
|
|
134,000 |
|
| Equipment (net) |
|
328,000 |
|
|
|
86,000 |
|
| Client contracts |
|
0 |
|
|
|
0 |
|
| Goodwill |
|
0 |
|
|
|
0 |
|
| Total assets |
$ |
1,925,750 |
|
|
$ |
446,000 |
|
| Accounts payable |
$ |
(98,500 |
) |
|
$ |
(43,500 |
) |
| Notes payable |
|
(519,250 |
) |
|
|
(95,000 |
) |
| Common stock |
|
(380,000 |
) |
|
|
(100,000 |
) |
| Additional paid-in capital |
|
(170,000 |
) |
|
|
(25,000 |
) |
| Retained earnings |
|
(758,000 |
) |
|
|
(182,500 |
) |
| Total liabilities and equities |
$ |
(1,925,750 |
) |
|
$ |
(446,000 |
) |
|
Prepare a consolidated balance sheet for Pratt and Spider as of
December 31, 2018.
