Pratt Company acquired all of Spider, Inc.’s outstanding shareson December 31, 2018, for $499,450 cash. Pratt will operate Spideras a wholly owned subsidiary with a separate legal and accountingidentity. Although many of Spider’s book values approximate fairvalues, several of its accounts have fair values that differ frombook values. In addition, Spider has internally developed assetsthat remain unrecorded on its books. In deriving the acquisitionprice, Pratt assessed Spider’s fair and book value differences asfollows:
| Book Values | | Fair Values |
| Computer software | $ | 30,000 | | | $ | 61,750 | |
| Equipment | | 70,000 | | | | 57,100 | |
| Client contracts | | 0 | | | | 120,800 | |
| In-process research anddevelopment | | 0 | | | | 34,250 | |
| Notes payable | | (96,000 | ) | | | (105,200 | ) |
|
At December 31, 2018, the following financial information isavailable for consolidation:
| Pratt | | Spider |
| Cash | $ | 9,750 | | | $ | 10,600 | |
| Receivables | | 104,000 | | | | 66,500 | |
| Inventory | | 133,500 | | | | 103,500 | |
| Investment in Spider | | 499,450 | | | | 0 | |
| Computer software | | 241,000 | | | | 30,000 | |
| Buildings (net) | | 613,500 | | | | 172,400 | |
| Equipment (net) | | 314,000 | | | | 70,000 | |
| Client contracts | | 0 | | | | 0 | |
| Goodwill | | 0 | | | | 0 | |
| Total assets | $ | 1,915,200 | | | $ | 453,000 | |
| Accounts payable | $ | (89,700 | ) | | $ | (68,500 | ) |
| Notes payable | | (511,500 | ) | | | (96,000 | ) |
| Common stock | | (380,000 | ) | | | (100,000 | ) |
| Additional paid-in capital | | (170,000 | ) | | | (25,000 | ) |
| Retained earnings | | (764,000 | ) | | | (163,500 | ) |
| Total liabilities andequities | $ | (1,915,200 | ) | | $ | (453,000 | ) |
|
Prepare a consolidated balance sheet for Pratt and Spider as ofDecember 31, 2018.
