Potter Company acquired 90 percent of the voting common shares of Stately Corpor
ID: 2329798 • Letter: P
Question
Potter Company acquired 90 percent of the voting common shares of Stately Corporation by issuing bonds with a par value and fair value of $121,500 to Stately's existing shareholders. Immediately prior to the acquisition, Potter reported total assets of $510,000, liabilities of $320,000, and stockholders' equity of $190,000. At that date, Stately reported total assets of $350,000, liabilities of $215,000, and stockholders’ equity of $135,000.
a.
What amount of total assets did Potter report in its individual balance sheet?
What amount of total assets was reported in the consolidated balance sheet?
c.
What amount of total liabilities was reported in the consolidated balance sheet?
d.
What amount of stockholders' equity was reported in the consolidated balance sheet?
Potter Company acquired 90 percent of the voting common shares of Stately Corporation by issuing bonds with a par value and fair value of $121,500 to Stately's existing shareholders. Immediately prior to the acquisition, Potter reported total assets of $510,000, liabilities of $320,000, and stockholders' equity of $190,000. At that date, Stately reported total assets of $350,000, liabilities of $215,000, and stockholders’ equity of $135,000.
Explanation / Answer
A) Potter reported total assets of $ 510,000 in its individual balance sheet.
B) total assets in consolidated balance sheet would be of $ 860,000.
C) Total liabilities of consolidated balance sheet would be of $ 535,000.
D) Total stackholder's equity would be of $ 203,500.
Stackholder's equity includes following items:-
Stackholder's equity- $190,000
Capital reserve - 13500
Calculation of capital reserve are as under-
Net asset purchased-135,000
Net payment made- 121,500
So there would be capital reserve of $ 13,500.
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