Student Name: Instructor Class: McGraw-Hill/Irwin Problem 02-19 MARSHALL COMPANY Part a.

Marshall and Tucker Consolidated Balances Marshall's acquisition of Tucker represents a bargain purchase because the fair value of the net assets acquired exceeds the fair value of the consideration transaction as follows: Fair value of consideration transferred Fair value of net assets acquired Gain on bargain purchase $ $ 400,000 515,000 115,000
Correct!

Record 3 transactions that occurred to create the business combination: MARSHALL COMPANY General Journal Account Investment in Tucker Long-Term Liabilities Common Stock (par value) Additional Paid-In Capital Gain on Bargain Purchase Debit 515,000 Credit
- Correct!

200,000 20,000 180,000 115,000

(To record liabilities and stock issued for Tucker acquisition at fair value)

Combination Expenses Cash

(To record payment of combination fees)

30,000 30,000

- Correct!

Additional Paid-In Capital Cash

(To record payment of stock issuance costs)

12,000 12,000

- Correct!

Marshall's trial balance is adjusted for the transactions (as shown in the worksheet that follows). Consideration transferred at fair value Book value (assets minus liabilities or stockholders' equity) Book value in excess of consideration Allocation to specific accounts based on fair value: Inventory Land Buildings Bargain purchase (fair market value in excess of purchase price) $ 400,000 460,000 (60,000)

5,000 20,000 30,000 $ (115,000)

Correct!

Student Name: Instructor Class: McGraw-Hill/Irwin Problem 02-19 Account Name Cash $ Balance Explanation 38,000 Add the two book values less acquisition costs.

Receivables

360,000 Add the two book values.

Inventory

505,000 Add the two book values, plus the fair value adjustment.

Land

400,000 Add the two book values, plus the fair value adjustment.

Buildings

670,000 Add the two book values, plus the fair value adjustment.

Equipment

210,000 Add the two book values

Total Assets

$ 2,183,000 Summation of the above individual figures.

Accounts Payable

190,000 Add the two book values.

Long-term Liabilities

830,000 Add the two book values plus the debt incurred by the parent in acquiring the subsidiary. 130,000 The parent's book value after stock issue to acquire the subsidiary. 528,000 The parent's book value after the stock issue to acquire the subsidiary less the stock issue costs. 505,000 Parent company balance less $30,000 in combination expenses plus $115,000 gain on bargain purchase.

Common Stock

Additional Paid-In Capital

Retained Earnings

Total Liabilities & Equity

$ 2,183,000 Summation of the above figures.

Student Name: Instructor Class: McGraw-Hill/Irwin Problem 02-19 Part b. Marshall and Tucker Consolidated Worksheet MARSHALL COMPANY AND CONSOLIDATED SUBSIDIARY Consolidation Worksheet January 1, 2011 Marshall Company $ 18,000 270,000 360,000 200,000 420,000 160,000 515,000 Tucker Company $ 20,000 90,000 140,000 180,000 220,000 50,000 Consolidation Entries Debit Credit Consolidated Totals $ [A] [A] [A] 5,000 20,000 30,000 [S] [A] $ 700,000 460,000 55,000 38,000 360,000 505,000 400,000 670,000 210,000
Correct! Correct! Correct! Correct! Correct! Correct! Correct! Correct!

Accounts Debit Balances Cash Receivables Inventory Land Buildings (net) Equipment (net) Investment in Tucker Total debits Credit Balances Accounts payable Long-term liabilities Common stock Additional paid-In capital Retained earnings, 1/1/11 Total credits

$ 1,943,000

$ 2,183,000

150,000 630,000 130,000 528,000 505,000 $ 1,943,000

40,000 200,000 120,000 340,000 700,000

$ [S] [S] 120,000 340,000

190,000 830,000 130,000 528,000 505,000 $ 2,183,000

Correct! Correct! Correct! Correct! Correct! Correct!

Given Data P02-19: MARSHALL COMPANY Tucker Company outstanding common stock acquired by Marshall Company Long-term liabilities issued by Marshall for acquisition Marshall Company's $1 par common stock issued for acquisition - number of shares Fair market value of Marshall stock Fees paid by Marshall for arranging acquisition Stock issuance costs paid by Marshall Tucker Company inventory - undervalued Tucker Company land - undervalued Tucker Company buildings - undervalued Marshall Tucker Company Company Book Book Value Value $ 60,000 $ 20,000 270,000 90,000 360,000 140,000 200,000 180,000 420,000 220,000 160,000 50,000 (150,000) (40,000) (430,000) (200,000) (110,000) (120,000) (360,000) (420,000) (340,000) 100% $ $ $ $ $ $ $ $ 200,000 20,000 10 30,000 12,000 5,000 20,000 30,000

Cash Receivables Inventory Land Buildings (net) Equipment (net) Accounts payable Long-term liabilities Common stock - $1 par Common stock - $20 par Additional paid-in capital Retained earnings, 1/1/11

Student Name: Instructor Class: McGraw-Hill/Irwin Problem 02-20

- Purchase price and account allocation Consideration transferred at fair value Book value Excess fair over book value Allocation of excess fair value to specific assets and liabilities -to Computer software -to Equipment -to Client contracts -to IPR&D -to Notes payable Goodwill $ 495,000 265,000 230,000 Correct!

50,000 (10,000) 100,000 40,000 (5,000) $

175,000 55,000 Correct!

PRATT COMPANY AND SPIDER, INC. Consolidation Worksheet December 31, 2011

Accounts Cash Receivables Inventory Investment in Spider Computer software Buildings (net) Equipment (net) Client contracts R&D asset Goodwill Total assets Accounts payable Notes payable Common stock Additional paid-in capital Retained earnings Total liabilities and equities $

Pratt 36,000 116,000 140,000 495,000 210,000 595,000 308,000 1,900,000 (88,000) (510,000) (380,000) (170,000) (752,000) (1,900,000)

Spicer $ 18,000 52,000 90,000 20,000 130,000 40,000 350,000 [A]

Consolidation Entries Debit Credit

[S] [A] 50,000 [A] [A] [A] [A] 100,000 40,000 55,000

265,000 230,000

Consolidated Totals $ 54,000 168,000 230,000 280,000 725,000 338,000 100,000 40,000 55,000 $ 1,990,000 (113,000) (575,000) (380,000) (170,000) (752,000) $ (1,990,000)

Correct! Correct! Correct! Correct! Correct! Correct! Correct! Correct! Correct! Correct! Correct! Correct! Correct! Correct! Correct! Correct! Correct!

10,000

(25,000) (60,000) (100,000) [S] (25,000) [S] (140,000) [S] (350,000)

[A] 100,000 25,000 140,000

5,000

Student Name: Instructor Class: McGraw-Hill/Irwin Problem 02-20 PRATT COMPANY AND SUBSIDIARY Consolidated Balance Sheet December 31, 2011 Cash Receivables Inventory Computer software Buildings (net) Equipment (net) Client contracts R&D asset Goodwill Total assets Accounts payable Notes payable Common stock Additional paid-in capital Retained earnings Total liabilities and equities $ 54,000 168,000 230,000 280,000 725,000 338,000 100,000 40,000 55,000 $ 1,990,000 Correct! $ (113,000) (575,000) (380,000) (170,000) (752,000) $ (1,990,000) Correct!

Given Data P02-20: PRATT COMPANY Spider, Inc. outstanding stock acquired by Pratt Company Cash paid by Pratt for acquisition Assessment of Spider's fair and book value differences: 100% $ 495,000

Computer software Equipment Client contracts In-process research and development Notes payable

Book Fair Values Values $ 20,000 $ 70,000 40,000 30,000 100,000 40,000 (60,000) (65,000)

December 31, 2011 Financial Information Pratt 36,000 116,000 140,000 495,000 210,000 595,000 308,000 $ 1,900,000 $ $ Spider 18,000 52,000 90,000 20,000 130,000 40,000 $ 350,000 $ (25,000) (60,000) (100,000) (25,000) (140,000) (350,000)

Cash Receivables Inventory Investment in Spider Computer software Buildings (net) Equipment (net) Client contracts Goodwill Total assets Accounts payable Notes payable Common stock Additional paid-in capital Retained earnings Total liabilities and equities

(88,000) $ (510,000) (380,000) (170,000) (752,000) $ (1,900,000) $

Student Name: Instructor Class: McGraw-Hill/Irwin Problem 02-30 Part a. Merrill, Inc. and Harriss Co. Statutory Merger - Purchase price and account allocation Cash paid Fair value of shares issued Direct acquisition costs Cost of acquisition Cost of acquisition Fair value of net assets acquired: Cash Receivables Inventory Land Buildings Equipment Patent Accounts payable Long-term liabilities Goodwill MERRILL, INC. General Journal Cash Receivables Inventory Land Buildings Equipment Patent Goodwill Accounts Payable Long-Term Liabilities Cash Common Stock (Merrill par value) Additional paid-in capital
(To record merger with Harriss at cost)

200,000 180,000 10,000 390,000

Correct!

$ $ 40,000 80,000 130,000 60,000 140,000 50,000 30,000 (30,000) (150,000) $

390,000

Correct!

350,000 40,000

Correct! Correct!

40,000 80,000 130,000 60,000 140,000 50,000 30,000 40,000 30,000 150,000 210,000 100,000 80,000

Additional Paid-in Capital Cash

(Stock issue costs incurred)

6,000 6,000

Student Name: Instructor Class: McGraw-Hill/Irwin Problem 02-30 Part b. MERRILL, INC. General Journal Account Investment in Harriss Co. Cash Common Stock (Merrill par value) Additional Paid-in Capital
(To record purchase of Harriss' shares)

Debit 380,000

Credit 200,000 100,000 80,000

Investment in Harriss Co. Cash

(Direct combination costs incurred)

10,000 10,000

Additional Paid-in Capital Cash

(Stock issuance costs incurred)

6,000 6,000

MERRILL, INC., AND HARRISS CO. Consolidation Worksheet January 1, 2008 Merrill, Inc. $ 84,000 160,000 220,000 390,000 $ Harriss Co. 40,000 90,000 130,000 60,000 110,000 50,000 480,000 Consolidation Entries Debit Credit Consolidated Totals $ [A] [S] [A] [A] [A] [A] 30,000 30,000 40,000 10,000 280,000 110,000 124,000 240,000 350,000 Correct! Correct! Correct! Correct! Correct! Correct! Correct! Correct! Correct! Correct!

Accounts Debits Cash Receivables Inventory Investment in Harriss Land Buildings Equipment Patent Goodwill Totals Credits Accounts payable Long-term liabilities Common stock Additional paid-in capital Retained earnings Totals

100,000 400,000 120,000 $ 1,474,000

160,000 540,000 170,000 30,000 40,000 $ 1,654,000

160,000 380,000 500,000 74,000 360,000 $ 1,474,000

30,000 170,000 40,000 240,000 480,000

$ [A] [S] [S] 20,000 40,000 240,000

190,000 530,000 500,000 74,000 360,000 $ 1,654,000

Correct! Correct! Correct! Correct! Correct! Correct!

Given Data P02-30: Harriss Company outstanding voting shares acquired by Merrill Inc. Cash paid by Merrill to acquire shares Merrill Company's $10 par common stock issued for acquisition - number of shares Fair market value of Merrill stock at acquisition date Fees paid by Merrill for arranging acquisition Stock issuance costs paid by Merrill Harriss Company fully amortized patent - value 100% $ $ $ $ $ $ 200,000 10,000 18 10,000 6,000 30,000

Cash Receivables Inventory Land Buildings (net) Equipment (net) Accounts payable Long-term liabilities Common stock Retained earnings

Merrill, Inc. Book Value $ 300,000 $ 160,000 220,000 100,000 400,000 120,000 (160,000) (380,000) (400,000) (360,000)

Harriss Company Book Fair Value Value 40,000 $ 40,000 90,000 80,000 130,000 130,000 60,000 60,000 110,000 140,000 50,000 50,000 (30,000) (30,000) (170,000) (150,000) (40,000) (240,000)