Pot Inc. acquired all Seed Inc.s outstanding $25 par common stock on December 31, 20X3, in exchange
Question:
Pot Inc. acquired all Seed Inc.’s outstanding $25 par common stock on December 31, 20X3, in exchange for 40,000 shares of its $25 par common stock. Pot’s common stock closed at $56.50 per share on a national stock exchange on December 31, 20X3. Both corporations continued to operate as separate businesses maintaining separate accounting records with years ending December 31.
On December 31, 20X4, after year-end adjustments and the closing of nominal accounts, the companies had condensed balance sheet accounts (below).
Additional Information
1. Pot uses the equity method of accounting for its investment in Seed.
2. On December 31, 20X3, Seed’s assets and liabilities had fair values equal to the book balances with the exception of land, which had a fair value of $550,000. Seed had no land transactions in 20X4.
3. On June 15, 20X4, Seed paid a cash dividend of $4 per share on its common stock.
4. On December 10, 20X4, Pot paid a cash dividend totaling $256,000 on its common stock.
5. On December 31, 20X3, immediately before the combination, the stockholders’ equity balance was:
6. The 20X4 net income amounts according to the separate books of Pot and Seed were $890,000 (exclusive of equity in Seed’s earnings) and $580,000, respectively.
Required
Prepare a consolidated balance sheet worksheet for Pot and its subsidiary, Seed, for December 31, 20X4. A formal consolidated balance sheet is not required.
Step by Step Answer:
Advanced Financial Accounting
ISBN: 9781265042615
13th International Edition
Authors: Theodore E. Christensen, David M. Cottrell, Cassy Budd