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Item 4

Item 4 4.16 points

On January 1, 2021, Casey Corporation exchanged $3,250,000 cash for 100 percent of the outstanding voting stock of Kennedy Corporation. Casey plans to maintain Kennedy as a wholly owned subsidiary with separate legal status and accounting information systems.

At the acquisition date, Casey prepared the following fair-value allocation schedule:

Fair value of Kennedy (consideration transferred)				$	3,250,000
Carrying amount acquired					2,600,000
Excess fair value				$	650,000
to buildings (undervalued)	$	342,000
to licensing agreements (overvalued)		(160,000	)		182,000
to goodwill (indefinite life)				$	468,000

Immediately after closing the transaction, Casey and Kennedy prepared the following postacquisition balance sheets from their separate financial records (credit balances in parentheses).

Accounts	Casey				Kennedy
Cash	$	500,000			$	176,250
Accounts receivable		1,410,000				345,000
Inventory		1,585,000				375,750
Investment in Kennedy		3,250,000				0
Buildings (net)		5,722,500				1,990,000
Licensing agreements		0				3,070,000
Goodwill		693,500				0
Total assets	$	13,161,000			$	5,957,000
Accounts payable	$	(391,000	)		$	(377,000	)
Long-term debt		(3,770,000	)			(2,980,000	)
Common stock		(3,000,000	)			(1,000,000	)
Additional paid-in capital		0				(500,000	)
Retained earnings		(6,000,000	)			(1,100,000	)
Total liabilities and equities	$	(13,161,000	)		$	(5,957,000	)

Prepare an acquisition-date consolidated balance sheet for Casey Corporation and its subsidiary Kennedy Corporation. (For accounts where multiple consolidation entries are required,combine all debit entries into one amount and enter this amount in the debit column of the worksheet. Similarly, combine all credit entries into one amount and enter this amount in the credit column of the worksheet. Input all amounts as positive values.)

Consolidated CASEY CORPORATION AND CONSOLIDATED SUBSIDIARY KENNEDY Worksheet for a Consolidated Balance Sheet January 1, 2021 Adjust. & Elim Casey Kennedy Debit Credit Cash S 500,000 $ 176,250 Accounts receivable 1,410,000 345,000 Inventory 1,585,000 375,750 Investment in Kennedy 3,250,000 Buildings (net) 5,722,500 1,990,000 Licensing agreements 3,070,000 Goodwill 693,500 Total assets $ 13,161,000 $ 5,957,000 Accounts payable S (391,000) (377,000) Long-term debt (3,770,000) (2,980,000) Common stock (3,000,000) (1,000,000) Additional paid-in capital (500,000) Retained earnings (6,000,000) (1,100,000) Total liabilities and equities S(13,161,000) S (5,957,000) S S