Reference no: EM132945978

On January 1, 2021, Marshall Company acquired 100% of the outstanding common stock of Tucker Company. To acquire these shares, Marshall issued $326,000 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 $28,000 to accountants, lawyers, and brokers for assistance in the acquisition and another $13,000 in connection with stock issuance costs.

Prior to these transactions, the balance sheets for the two companies were as follows

                                                 Marshall Company Book                     Tucker Book Value
Cash                                                  $68,700                                            $22,600
Receivables                                          341,000                                             155,000
Inventory                                              370,000                                             212,000
Land                                                      249,000                                            254,000
Buildings (Net)                                         499,000                                              270,000
Equipment (net)                                        196,000                                                52,500
Accounts Payable                                       (217,000)                                           (41,100)
Long-Term liabilities                                     (481,000)                                           (326,000)
Common Stock $1 par                                    (110,000)                                                 -
Common Stock $20 par                                     -                                                   (120,000)
Additional paid-in capital                                   (360,000)                                              0
Retained Earnings, 1/1/21                                 (555,700)                                          (479,000)

In Marshall's appraisal of Tucker, it deemed three accounts to be undervalued on the subsidiary's books: Inventory by $7,250, Land by $20,200 and Buildings by $34,600. Marshall plans to maintain Tucker's separate legal identity and to operate Tucker as a wholly owned subsidiary.

Problem a. Determine the amounts that Marshall Company would report in its post-acquisition consolidated balance sheet. In preparing the post-acquisition balance sheet, any required adjustments to income accounts from the acquisition should be closed to Marshall's retained earnings. Other accounts will also need to be added or adjusted to reflect the journal entries Marshall prepared in recording the acquisition.

Problem b. to verify the answers found in part (a), prepare a worksheet to consolidate the balance sheets of these two companies as of January 1, 2021.