Reference no: EM132657140

On January 1, 2018, 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 $20 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                                        210,000
Equipment (net)                            160,000                                         50,000
Goodwill                                            -                                              10,000
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)                                                 -
Retained earnings, 1/1/18                  (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.

Required:

Question 1. Calculate the goodwill for this acquisition.

Question 2. Prepare the eliminating entries to consolidate the balance sheets of Marshall and Tucker at the date of acquisition.

Question 3. Prepare worksheet to consolidate the balance sheets of these two companies as of January 1, 2018.