ASAP$-$ Consolidation Working Paper, Simple Example$$

Below are the condensed balance sheets of Princecraft and Sylvan Companies just prior to Princecraft$$s acquisition of all of the voting shares of Sylvan for $$40$ million in cash. The book values of Sylvan Company$$s net assets approximate fair value.

Balance SheetsPrincecraft

CompanySylvan

CompanyCash$ $60,000,000$$ $2,000,000$Other current assets$20,000,0008,000,000$Property and equipment, net$70,000,00015,000,000$Total assets$$150,000,000$$$25,000,000$Total liabilities$ $30,000,000$$ $8,000,000$Common stock$15,000,0005,000,000$Additional paid$-$in capital$45,000,00010,000,000$Retained earnings$60,000,0002,000,000$Total liabilities and equity$$150,000,000$$$25,000,000$

Required$$

a$.$ Prepare the journal entry Princecraft makes to record the acquisition on its own books.

Enter answers in millions $($Example: $$40,000,000$ equals $$40$ million$).$

DescriptionDebitCreditAnswer $1$CashCommon stockGoodwillInvestment in SylvanRetained earnings

Answer $2$

Answer $3$

Answer $4$CashCommon stockGoodwillInvestment in SylvanRetained earnings

Answer $5$

Answer $6$

b$.$ Prepare the consolidation working paper at the date of acquisition.$$

Enter answers in millions$($Example: $$40,000,000$ equals $$40$ million$).$

Use negative signs with your Credit $($Cr$)$ answers in the Dr$($Cr$)$ columns $($not in the Eliminations Credit column$).$

Consolidation Working PaperAccounts Taken From BooksEliminations$($in millions$)$Princecraft

Dr$($Cr$)$Sylvan

Dr$($Cr$)$DebitCreditConsolidated

Balances Dr$($Cr$)$CashAnswer $7$

$$2$Answer $8$

Other current assetsAnswer $9$

$8$Answer $10$

Property and equipment, netAnswer $11$

$15$Answer $12$

Investment in SylvanAnswer $13$

Answer $14$

$($E$)$Answer $15$

Answer $16$

$($R$)$Goodwill$($R$)$Answer $17$

Answer $18$

LiabilitiesAnswer $19$

$(8)$Answer $20$

Common stockAnswer $21$

$(5)($E$)$Answer $22$

Answer $23$

Additional paid$-$in capitalAnswer $24$

$(10)($E$)$Answer $25$

Answer $26$

Retained earningsAnswer $27$

$(2)($E$)$Answer $28$

Answer $29$

TotalAnswer $30$

Answer $31$

Answer $32$

Answer $33$

Answer $34$

c$.$ Prepare the consolidated balance sheet at the date of acquisition, in good form.$$

Enter answers in millions $($Example$,$ $$22,000,000$ equals $$22$ million$).$

Princecraft Company and Subsidiary

Consolidated Balance Sheet

Date of Acquisition$($in millions$)$AssetsLiabilitiesCashAnswer $35$

Total liabilitiesAnswer $36$

Other current assetsAnswer $37$

Property and equipment, netAnswer $38$

Shareholders$$ equityGoodwillAnswer $39$

Common stockAnswer $40$

Additional paid$-$in capitalAnswer $41$

Retained earningsAnswer $42$

Total equityAnswer $43$

Total assetsAnswer $44$

Total liabilities and equityAnswer $45$