Following are preacquisition financial balances for Padre Company and Sol Company as of December 31. Also included
Question:
Following are preacquisition financial balances for Padre Company and Sol Company as of December 31. Also included are fair values for Sol Company accounts.
| Padre | Sol Company | |||||||||||||
| Book Values | Book Values | Fair Values | ||||||||||||
| 12/31 | 12/31 | 12/31 | ||||||||||||
Cash | | $ | 424,000 | | | | $ | 64,400 | | | | $ | 64,400 | | |
Receivables | | | 269,250 | | | | | 307,000 | | | | | 307,000 | | |
Inventory | | | 455,000 | | | | | 252,000 | | | | | 307,600 | | |
Land | | | 655,000 | | | | | 170,000 | | | | | 146,100 | | |
Building and equipment (net) | | | 617,500 | | | | | 292,000 | | | | | 353,100 | | |
Franchise agreements | | | 257,000 | | | | | 235,000 | | | | | 274,000 | | |
Accounts payable | | | (394,000 | ) | | | | (152,000 | ) | | | | (152,000 | ) | |
Accrued expenses | | | (181,000 | ) | | | | (53,000 | ) | | | | (53,000 | ) | |
Long-term liabilities | | | (917,500 | ) | | | | (487,500 | ) | | | | (487,500 | ) | |
Common stock—$20 par value | | | (660,000 | ) | | | | | | | | | | | |
Common stock—$5 par value | | | | | | | | (210,000 | ) | | | | | | |
Additional paid-in capital | | | (70,000 | ) | | | | (90,000 | ) | | | | | | |
Retained earnings, 1/1 | | | (400,000 | ) | | | | (302,000 | ) | | | | | | |
Revenues | | | (1,019,250 | ) | | | | (396,900 | ) | | | | | | |
Expenses | | | 964,000 | | | | | 371,000 | | | | | | | |
|
Note: Parentheses indicate a credit balance.
On December 31, Padre acquires Sol’s outstanding stock by paying $184,000 in cash and issuing 16,800 shares of its own common stock with a fair value of $40 per share. Padre paid legal and accounting fees of $25,500 as well as $6,500 in stock issuance costs.
Determine the value that would be shown in Padre’s consolidated financial statements for each of the accounts listed.
Inventory $762,600
Land $801,100
Buildings and equipment $970,600
Franchise agreements $531,000
Goodwill $96,300
Revenues $1,019,250
Additional paid-in capital $399,500
Expenses $989,500
Retained earnings, 1/1 $400,000
Retained earnings, 12/31 $???
how much is the retained earings in 12/31 with an explaination please?
Financial and Managerial Accounting the basis for business decisions
ISBN: 978-0078025778
17th edition
Authors: Jan Williams, Susan Haka, Mark Bettner, Joseph Carcello