Consolidated balance sheet for Penn and Southern
Penn Company acquired all of Southern, Inc.’s outstanding shares on December 31, 2018, for $1,089,000 cash. Penn will operate Southern as a wholly owned subsidiary with a separate legal and accounting identity. Although many of Southern’s book values approximate fair values, several of its accounts have fair values that differ from book values. In addition, Southern has internally developed assets that remain unrecorded on its books.
In deriving the acquisition price, Penn assessed Southern’s fair and book value differences as follows:
Book Values Fair Values
Computer software $ 44,000 $154,000
Equipment 88,000 66,000
Client contracts –0– 220,000
In-process research and development –0– 88,000
Notes payable (132,000) (143,000)
At December 31, 2018, the following financial information is available for consolidation:
Penn Southern
Cash $79,200 $39,600
Receivables 255,200 111,100
Inventory 308,000 198,000
Investment in Spider 1,089,000 –0–
Computer software 462,000 44,000
Buildings (net) 1,309,000 286,000
Equipment (net). 677,600 88,000
Client contracts –0– –0–
Goodwill –0– –0–
Total assets $4,180,000 $770,000
Accounts payable $(193,600) $(55,000)
Notes payable (1,122,000) (132,000)
Common stock (836,000) (220,000)
Additional paid-in capital (374,000) (55,000)
Retained earnings (1,654,400) (308,000)
Total liabilities and equities $(4,180,000) $(770,000)
Prepare a consolidated balance sheet for Penn and Southern as of December 31, 2018.