Question

On January 1, 2011, Marshall Company acquired 100 percent of the outstanding common stock of Tucker Company. To acquire these shares, Marshall issued $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.
Marshall 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:


In Marshall’s appraisal of Tucker, it deemed three accounts to be undervalued on the subsidiary’s books: Inventory by $5,000, Land by $20,000, and Buildings by $30,000. Marshall plans to maintain Tucker’s separate legal identity and to operate Tucker as a wholly owned subsidiary.
a. Determine the amounts that Marshall Company would report in its post-acquisition balance sheet. In preparing the post-acquisition balance sheet, any required adjustments to income accounts from the acquisition should be closed to Marshall’s retained earnings.
b. To verify the answers found in part (a), prepare a worksheet to consolidate the balance sheets of these two companies as of January2011.


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  • CreatedOctober 04, 2014
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