Question

Assume that a parent company acquires its subsidiary on 1/1/xx, by exchanging 41,500 shares of its $1 par value common stock, with a market value on acquisition date of $36 per share, for all of the outstanding voting shares of the subsidiary. You have been charged with preparing the consolidation of these two entities at 12/31/xx. On acquisition date (1/1/xx), all of the subsidiary’s assets and liabilities had fair values equaling their book values except PPE assets are undervalued by $81,000 (depreciation =$5,400 per year), the subsidiary has an unrecorded patent with a fair value of $261,000 (amortization = $32,625 per year) and the parent records $162,000 of goodwill in the transaction. Submission Requirements:

Answer 1

Answer: The total Asset is $531,225, The total owners Equity is $1,494,000

Explanation:

A balance sheet is a summary of debit and credit balances of asset and liabilities in a ledger. It is a financial statement prepared in order to determine the financial position of a business, in the event of acquisition of a subsidiary by a parent company, then a consolidated balance sheet will be prepared to unite the two entities. A consolidated balance sheet is a financial statement prepared to record the asset and liabilities of the two entities as one entity.in this case the aquisi

Consolidated Balance Sheet As At 1/1/××

$ $

Fixed Asset

PPE Asset (undervalued ) 81,000

Less : Depreciation. 5,400

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75,600

Goodwill. 162,000

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Total Fixed Asset 237,600

Other Asset

Patent. 261,000

Amortization. 32,625

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293,625

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Total Asset. 531,225

Owners Equity

Common Stock 1,494,000

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Total owners Equity 1,494,000