On January 1, 2011, Marshall Company acquired 100 percent of the outstanding common stock of Tucker Company. To acquire these shares, Marshall issued $200,000 in long-term liabilities and 20,000 shares of common stock having a par value of $1 per share but a fair value of $10 per share. Marshall paid $30,000 to accountants, lawyers, and brokers for assistance in the acquisition and another $12,000 in connection with stock issuance costs.
Prior to these transactions, the balance sheets for the two companies were as follows:
Marshall Company
Book Value Tucker Company
Book Value
Cash $ 60,000 $ 20,000
Receivables 270,000 90,000
Inventory 360,000 140,000
Land 200,000 180,000
Buildings (net) 420,000 220,000
Equipment (net) 160,000 50,000
Accounts payable (150,000) (40,000)
Long-term liabilities (430,000) (200,000)
Common stock-$1 par value (110,000)
Common stock-$20 par value (120,000)
Additional paid-in capital (360,000) 0
Retained earnings, 1/1/11 (420,000) (340,000)
In Marshall's appraisal of Tucker, it deemed three accounts to be undervalued on the subsidiary's books: Inventory by $5,000, Land by $20,000, and Buildings by $30,000. Marshall plans to maintain Tucker's separate legal identity and to operate Tucker as a wholly owned subsidiary.
(a) Determine the amounts that Marshall Company would report in its postacquisition balance sheet