The following financial statement information is for an investor company and an investee company on January 1, 2013. On January 1, 2013, the investor company's common stock had a traded market value of $87.5 per share, and the investee company's common stock had a traded market value of $77.5 per share.
Investor Investee Investor Investee
Receivables & inventories $150,000 $75,000 $135,000 $67,500
Land 300,000 150,000 450,000 225,000
Property & equipment 337,500 150,000 375,000 195,000
Trademarks & patents — — 225,000 120,000
Total assets $787,500 $375,000 $1,185,000 $607,500
Liabilities $225,000 $120,000 $270,000 $142,500
Common stock ($1 par) 30,000 15,000
Additional paid-in capital 420,000 225,000
Retained earnings 112,500 15,000
Total liabilities & equity $787,500 $375,000
Net assets $562,500 $255,000 $915,000 $465,000
Required:
a. Assume that the investor company issued 14,250 new shares of the investor company’s common stock in exchange for all of the individually identifiable assets and liabilities of the investee company. The financial information presented, above, was prepared immediately before this transaction. Provide the Investor Company’s balances (i. e., on the investor’s books, before consolidation) for the following accounts immediately following the acquisition of the investee’s net assets:
a. Receivables & Inventories
b. Land
c. Property & Equipment
d. Trademarks & Patents
e. Investment in Investee
f. Goodwill
g. Total Assets
h. Liabilities
i. Common Stock ($1 par)
j. Additional Paid-In Capital
k. Retained Earnings
l. Total Liabilities and Equity
b. Assume that the investor company issued 14,250 new shares of the investor company’s common stock in exchange for all of the investee company’s common stock. The financial information presented, above, was prepared immediately before this transaction. Provide the Investor Company’s balances (i. e., on the investor’s books, before consolidation) for the following accounts immediately following the acquisition of the investee’s net assets:
a. Receivables & Inventories
b. Land
c. Property & Equipment
d. Trademarks & Patents
e. Investment in Investee
f. Goodwill
g. Total Assets
h. Liabilities
i. Common Stock ($1 par)
j. Additional Paid-In Capital
k. Retained Earnings
l. Total Liabilities and Equity
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