Reference no: EM131831523

Problem - On January 1, 2013, 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. In preparing the postacquisition balance sheet, any required adjustments to income accounts from the acquisition should be closed to Marshall's retained earnings.

(b) To verify the answers found in part (a), prepare a worksheet to consolidated the balance sheets of these two companies as of January 1, 2013.