Reference no: EM133144

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.