80.2K

Verified Solution

Link Copied!

On January 1, 2018 Casey Corporation exchanged $3,300,000 cash for 100 percent of the outstanding voting stock of Kennedy Corporation. Casey plans to maintain Kennedy as a wholly owned subsidiary with separate legal status and accounting information systems.

At the acquisition date, Casey prepared the following fair-value allocation schedule:

Fair value of Kennedy (consideration transferred)					$	3,300,000
Carrying amount acquired						2,600,000
Excess fair value					$	700,000
to buildings (undervalued)	$	382,000
to licensing agreements (overvalued)		(108,000	)			274,000
to goodwill (indefinite life)					$	426,000

Immediately after closing the transaction, Casey and Kennedy prepared the following postacquisition balance sheets from their separate financial records.

Accounts	Casey				Kennedy
Cash	$	457,000			$	172,500
Accounts receivable		1,655,000				347,000
Inventory		1,310,000				263,500
Investment in Kennedy		3,300,000				0
Buildings (net)		6,315,000				2,090,000
Licensing agreements		0				3,070,000
Goodwill		347,000				0
Total assets	$	13,384,000			$	5,943,000
Accounts payable	$	(394,000	)		$	(393,000	)
Long-term debt		(3,990,000	)			(2,950,000	)
Common stock		(3,000,000	)			(1,000,000	)
Additional paid-in capital		0				(500,000	)
Retained earnings		(6,000,000	)			(1,100,000	)
Total liabilities and equities	$	(13,384,000	)		$	(5,943,000	)

Prepare an acquisition-date consolidated balance sheet for Casey Corporation and its subsidiary Kennedy Corporation. (Negative amounts should be indicated by a minus sign.)

Answer & Explanation Solved by verified expert

See Answer