Prather Inc bought 80% of Sands: Prepare consolidation worksheet
Not what you're looking for?
Prather Inc. bought eighty percent of the outstanding common stock of Sands Corp. on January 1, 2008, for $952,000 cash. Total book value of Sands on that date was only $840,000. However, Sands possessed several accounts that had fair market values that differed from their book values:
Book Value Fair Market Value
Land $224,000 $315,000
Buildings and Equipment (10 yr life) $385,000 $350,000
Notes Payable (due in 8 yrs) $182,000 $168,000
The business combination was accounted for using the acquisition method. For internal reporting purposes, Prather Inc. employed the full equity method to account for this investment.
The following account balances are for the year ending December 31, 2008 for both companies:
Prather Inc. Sands Corp.
Revenues $(1,904,000) $(756,000)
Expenses 1,406,000 567,000
Equity in Income of Sands (152,600) 0
Net Income $(650,600) $(189,000)
Retained Earnings (1/1) $(1,771,000) $(616,000)
Net income (from above) (650,600) (189,000)
Dividends Paid 364,000 91,000
Retained Earnings (12/31) $(2,057,600) $(714,000)
Current Assets $1,351,000 $739,200
Investment in Sands Corp 1,031,800 0
Land 408,800 224,000
Buildings and Equipment (net) 1,227,800 364,000
TOTAL ASSETS $4,019,400 $1,327,200
Accounts Payable $(267,800) $(207,200)
Notes Payable (644,000) (182,000)
Common Stock (420,000) (140,000)
Additional Paid-in-Capital (630,000) (84,000)
Retained Earnings (2,057,600) (714,000)
TOTAL LIAB & EQUITY $(4,019,400) $(1,327,200)
Using the information provided, prepare a consolidation worksheet for this business combination.
Purchase this Solution
Solution Summary
The expert prepares a consolidation worksheet for Prather Inc bought 80% of Sands.
Purchase this Solution
Free BrainMass Quizzes
Employee Orientation
Test your knowledge of employee orientation with this fun and informative quiz. This quiz is meant for beginner and advanced students as well as professionals already working in the HR field.
IPOs
This Quiz is compiled of questions that pertain to IPOs (Initial Public Offerings)
Change and Resistance within Organizations
This quiz intended to help students understand change and resistance in organizations
Academic Reading and Writing: Critical Thinking
Importance of Critical Thinking
Understanding the Accounting Equation
These 10 questions help a new student of accounting to understand the basic premise of accounting and how it is applied to the business world.