Business, 16.04.2021 17:40 Katepratt7637
On January 1, 2021, Casey Corporation exchanged $3,194,000 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) $3,194,000
Carrying amount acquired 2,600,000
Excess fair value $650,000
to buildings (undervalued) $342,000
to licensing agreements (overvalued) (160,000) 182,000
to goodwill (indefinite life) $468,000
Immediately after closing the transaction, Casey and Kennedy prepared the following postacquisition balance sheets from their separate financial records (credit balances in parentheses).
Accounts Casey Kennedy
Cash $500,000 $176,250
Accounts receivable 1,410,000 345,000
Inventory 1,585,000 375,750
Investment in Kennedy 3,250,000 0
Buildings (net) 5,722,500 1,990,000
Licensing agreements 0 3,070,000
Goodwill 693,500 0
Total assets $13,161,000 $5,957,000
Accounts payable $(391,000) $(377,000)
Long-term debt (3,770,000) (2,980,000)
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 $(13,161,000) $(5,957,000)
Required:
Prepare an acquisition-date consolidated balance sheet for Casey Corporation and its subsidiary Kennedy Corporation.
Answers: 3
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On January 1, 2021, Casey Corporation exchanged $3,194,000 cash for 100 percent of the outstanding v...
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