On January 1, 2021, Pentagon Corporation acquired 100 percent of Square Company's common stock for $123,000...

 

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On January 1, 2021, Pentagon Corporation acquired 100 percent of Square Company's common stock for $123,000 cash. Data from the balance sheets of the two companies included the following amounts as of the date of acquisition: Cash Accounts Receivable Inventory Land Buildings and Equipment (Net) Investment in Square Corp. Total Assets Accounts Payable Bonds Payable Common Stock Retained Earnings Total L al Liabilities and Equity Pentagon Co. $12,750 54,000 24,000 75,000 76,000 123,000 $364,750 $77,000 120,000 90,000 77,750 $364,750 Square Co. $9,500 33,000 22,500 30,000 70,000 $165,000 $35,000 32,000 60,000 38,000 $165,000 At the date of the business combination, the book values of Square's net assets and liabilities approximated fair value except for inventory, which had a fair value of $24,500, land, which had a fair value of $35,000, and building and equipment, which has fair value of $78,000. Required: a) Prepare Book Value calculation table. (5 points) b) Give the basic consolidation entry. (15 points) c) Prepare the excess Value (Differential) Calculations table. (5 points) d) Give excess value (differential) reclassification entries at the date of acquisition. (20 points) e) What is the balance of Inventory in the consolidated balance sheet as of January 1, 2021? (5 points) 1) What is the balance of Retained earnings in the consolidated balance sheet as of January 1, 2021? (5 points) 8) What is the amount of total assets in the consolidated balance sheet as of January 1, 2021? (5 points) On January 1, 2021, Pentagon Corporation acquired 100 percent of Square Company's common stock for $123,000 cash. Data from the balance sheets of the two companies included the following amounts as of the date of acquisition: Cash Accounts Receivable Inventory Land Buildings and Equipment (Net) Investment in Square Corp. Total Assets Accounts Payable Bonds Payable Common Stock Retained Earnings Total L al Liabilities and Equity Pentagon Co. $12,750 54,000 24,000 75,000 76,000 123,000 $364,750 $77,000 120,000 90,000 77,750 $364,750 Square Co. $9,500 33,000 22,500 30,000 70,000 $165,000 $35,000 32,000 60,000 38,000 $165,000 At the date of the business combination, the book values of Square's net assets and liabilities approximated fair value except for inventory, which had a fair value of $24,500, land, which had a fair value of $35,000, and building and equipment, which has fair value of $78,000. Required: a) Prepare Book Value calculation table. (5 points) b) Give the basic consolidation entry. (15 points) c) Prepare the excess Value (Differential) Calculations table. (5 points) d) Give excess value (differential) reclassification entries at the date of acquisition. (20 points) e) What is the balance of Inventory in the consolidated balance sheet as of January 1, 2021? (5 points) 1) What is the balance of Retained earnings in the consolidated balance sheet as of January 1, 2021? (5 points) 8) What is the amount of total assets in the consolidated balance sheet as of January 1, 2021? (5 points)

Answer rating: 100% (QA)

Solution Common Stock of Square Retained Earnings of Square Original Book Value ... View the full answer