Question :
Q1. On June 30, 2013, Wisconsin, Inc., issued $300,000 in debt and 15,000 new shares of its $10 par value stock to Badger Company owners in exchange for all of the outstanding shares of that company. Wisconsin shares had a reasonable value of $40 per share. Prior to the combination, the financial statements for Wisconsin and Badger for the six-month period ending June 30, 2013, were as given:
Wisconsin Badger
Revenues $(900,000) $(300,000)
Expenses 660,000 200,000
Net income $(240,000) $(100,000)
Retained earnings, 1/1 $(800,000) $(200,000)
Net income (240,000) (100,000)
Dividends paid 90,000 0
Retained earnings, 6/30 $(950,000 )$(300,000)
Cash $ 80,000 $110,000
Receivables and inventory 400,000 170,000
Patented technology (net) 900,000 300,000
Equipment (net) 700,000 600,000
Total assets $ 2,080,000 $1,180,000
Liabilities $ (500,000) $ (410,000)
Common stock (360,000) (200,000)
Additional paid-in capital (270,000) (270,000)
Retained earnings (950,000) (300,000)
Total liabilities and equities $(2,080,000 ) $(1,180,000)
Note: Parentheses indicate a credit balance.
Wisconsin also paid $30,000 to a broker for arranging the transaction. In addition, Wisconsin paid $40,000 in stock issuance costs. Badger's equipment was essentially worth $700,000, but its patented technology was valued at only $280,000.
What are the consolidated balances for the subsequent accounts?
Accounts Amounts
a. Net income $
b. Retained earnings, 1/1/13 $
c. Patented technology $
d. Goodwill $
e. Liabilities $
f. Common stock $
g. Additional paid-in capital $
Q2.
The subsequent book and fair values were available for Westmont Company as of March 1.
Book Value Fair Value
Inventory $630,000 $600,000
Land 750,000 990,000
Buildings 1,700,000 2,000,000
Customer relationships 0 800,000
Accounts payable (80,000) (80,000)
Common stock (2,000,000)
Additional paid-in capital(500,000)
Retained earnings 1/1 (360,000)
Revenues (420,000)
Expenses 280,000
Note: Parentheses indicate a credit balance.
Arturo Company pays $4,000,000 issues and cash 20,000 shares of its $2 par value general stock (fair value of $50 per share) for all of Westmont's common stock in a merger, after which Westmont may cease to exist as a split entity. Stock issue costs amount to $25,000 and Arturo pays $42,000 for legal fees to do the transaction.
Purpose Arturo's journal entry to record its acquisition of Westmont.