Suppose Poseidon Publishing Company acquired all the common shares of Neptune Book Company for $80 million cash at the start of the year. Immediately before the business combination, each company had the following condensed balance sheet accounts (in millions):

1. Prepare a tabulation of the consolidated balance sheet accounts immediately after the acquisition. Use the balance-sheet-equation format.
2. Suppose Poseidon and Neptune have the following results for the year:

Prepare income statements for the year for Poseidon, Neptune, and the consolidated entity. Assume that neither Poseidon nor Neptune sells items to the other.
3. Present the effects of the operations for the year on Poseidon’s accounts and on Neptune’s accounts, using the balance sheet equation. Also tabulate the consolidated balance sheet accounts at the end of the year. Assume that liabilities are unchanged.
4. Suppose Neptune paid a cash dividend of $10 million. What accounts in requirement 3 would this affect and by howmuch?

  • CreatedNovember 19, 2014
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