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Homework answers / question archive / Pratt Company acquired all of Spider, Inc

Pratt Company acquired all of Spider, Inc

Accounting

Pratt Company acquired all of Spider, Inc.’s outstanding shares on December 31, 2018, for $507,950 cash. Pratt will operate Spider as a wholly owned subsidiary with a separate legal and accounting identity. Although many of Spider’s book values approximate fair values, several of its accounts have fair values that differ from book values. In addition, Spider has internally developed assets that remain unrecorded on its books. In deriving the acquisition price, Pratt assessed Spider’s fair and book value differences as follows:

  Book Values   Fair Values
Computer software $ 29,000     $ 78,600  
Equipment   55,800       40,700  
Client contracts   0       114,000  
In-process research and development   0       30,500  
Notes payable   (72,900 )     (81,950 )
 

At December 31, 2018, the following financial information is available for consolidation:

  Pratt   Spider
Cash $ 8,950     $ 18,400  
Receivables   103,500       87,000  
Inventory   152,500       86,000  
Investment in Spider   507,950       0  
Computer software   227,000       29,000  
Buildings (net)   604,750       130,500  
Equipment (net)   358,000       55,800  
Client contracts   0       0  
Goodwill   0       0  
Total assets $ 1,962,650     $ 406,700  
Accounts payable $ (90,400 )   $ (44,000 )
Notes payable   (514,250 )     (72,900 )
Common stock   (380,000 )     (100,000 )
Additional paid-in capital   (170,000 )     (25,000 )
Retained earnings   (808,000 )     (164,800 )
Total liabilities and equities $ (1,962,650 )   $ (406,700 )
 

Prepare a consolidated balance sheet for Pratt and Spider as of December 31, 2018.

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