Problem 2-29 (Static) (LO 2-4, 2-5, 2-6b, 2-6c, 2-7)

On January 1, 2024, Presidio Company acquired 100 percent of the outstanding common stock of Mason Company. To acquire these shares, Presidio issued to the owners of Mason $200,000 in long-term liabilities and 20,000 shares of common stock having a par value of $1 per share but a fair value of $10 per share. Presidio paid $30,000 to accountants, lawyers, and brokers for assistance in the acquisition and another $12,000 in connection with stock issuance costs.

Prior to these transactions, the balance sheets for the two companies were as follows:

Items	Presidio Company	Mason Company
Cash	$ 60,000	$ 20,000
Receivables	270,000	90,000
Inventory	360,000	140,000
Land	200,000	180,000
Buildings (net)	420,000	220,000
Equipment (net)	160,000	50,000
Accounts payable	(150,000)	(40,000)
Long-term liabilities	(430,000)	(200,000)
Common stock$1 par value	(110,000)	0
Common stock$20 par value	0	(120,000)
Additional paid-in capital	(360,000)	0
Retained earnings, 1/1/24	(420,000)	(340,000)

Note: Parentheses indicate a credit balance.

Presidio's appraisal of Mason's fair values deemed three accounts to be undervalued: Inventory by $5,000, Land by $20,000, and Buildings by $30,000. Presidio plans to maintain Mason's separate legal identity and to operate Mason as a wholly owned subsidiary.

Required:

1. Prepare Presidio's journal entries to record its acquisition of Mason, related professional fees paid, and stock acquisition costs.
2. Separately determine each individual amount that Presidio Company would report in its consolidated balance sheet following the acquisition of Mason. Include in Presidio's retained earnings any adjustments to income accounts from part (a).
3. To verify the answers found in part (b), adjust Presidio's column of accounts for the journal entries in part (a) and then prepare a worksheet to consolidate the balance sheets of these two companies at the acquisition date.