Kaplan AC 450 Unit 2 Problem 2-23

Problem 2-23 [LO4, LO5, LO7]
On January 1, 2013, Marshall Company acquired 100 percent of the outstanding common stock of Tucker Company. To acquire these shares, Marshall issued $190,950 in long-term liabilities and 21,600 shares of common stock having a par value of $1 per share but a fair value of $10 per share. Marshall paid $31,200 to accountants, lawyers, and brokers for assistance in the acquisition and another $23,100 in connection with stock issuance costs.
Prior to these transactions, the balance sheets for the two companies were as follows:

Marshall Company
Book Value Tucker Company
Book Value
Cash $ 88,000 $ 14,400
Receivables 300,000 93,600
Inventory 327,000 111,000
Land 208,000 251,000
Buildings (net) 430,000 297,000
Equipment (net) 237,000 58,750
Accounts payable (186,000) (58,750)
Long-term liabilities (510,000) (281,000)
Common stock—$1 par value (110,000)
Common stock—$20 par value (120,000)
Additional paid-in capital (360,000) 0
Retained earnings, 1/1/13 (424,000) (366,000)
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Note: Parentheses indicate a credit balance.

In Marshall’s appraisal of Tucker, it deemed three accounts to be undervalued on the subsidiary’s books: Inventory by $5,800, Land by $25,050, and Buildings by $39,600. Marshall plans to maintain Tucker’s separate legal identity and to operate Tucker as a wholly owned subsidiary.

a.Determine the amounts that Marshall Company would report in its postacquisition balance sheet. In preparing the postacquisition balance sheet, any required adjustments to income accounts from the acquisition should be closed to Marshall’s retained earnings. (Input all amounts as positive values.)
b.Prepare a worksheet to consolidate the balance sheets of these two companies as of January 1, 2013. (Leave no cells blank - be certain to enter "0" wherever required. Enter the consolidation entries of 'Investment in Tucker Company' in order of (S) Elimination of subsidiary’s stockholders’ equity and (A) Allocation of Tucker's consideration fair value in excess of book value. Input all amounts as positive values except for the credit balances which should be entered with the minus sign.)