Pratt Company acquired all of Spider, Inc.\'s outstanding shares on December 31,

Question

Pratt Company acquired all of Spider, Inc.'s outstanding shares on December 31, 2015, for $495,000 cash. Although many of Spider's book values approximate fair values, several of its accounts have fair values that differ from book values. In addition, Spider has internally developed assets that remain unrecorded on its books. In deriving the acquisition price, Pratt assessed Spider's fair and book value differences as follows:

Computer Software            Book Value - $20,000          Fair Values - $70,000

Equipment                        BV- $40,000 FV - $30,000

Client contracts                 BV- $0 FV - $100,000

In-process research and development BV - $0 FV - $40,000

Notes Payable BV - ($60,000)                      FV - ($65,000)

At December 31, 2009, the following financial information is available for consolidation:

Cash            (Pratt) $36,000           (Spider) $18,000

Receivables (Pratt) $116,000          (Spider) $52,000

Inventory (Pratt) $140,000               (Spider) $90,000

Investment in Spider (Pratt) $495,000        (Spider) $0

Computer Software (Pratt) $210,000     (Spider) $20,000

Buildings (net)        (Pratt) $595,000      (Spider) $130,000

Equipment (net)      (Pratt) $308,000       (Spider) $40,000

Client Contracts    (Pratt) $0                  (Spider) $0

Goodwill              (Pratt) $0                    (Spider)   $0

Total assets    (Pratt) $1,900,000            (Spider) $350,000

Accounts payable (Pratt) ($88,000)          (Spider) ($25,000)

Notes Payable    (Pratt) ($510,000)           (Spider) ($60,000)

Common Stock   (Pratt) ($380,000)           (Spider)    ($100,000)

Additional paid in capital (Pratt) ($170,000)          (Spider) ($25,000)

Retained Earnings        (Pratt)   ($752,000)        (Spider) ($140,000)

Total liabilities and equities   (Pratt) ($1,900,000)       (Spider)   ($350,000)

Prepare a consolidated balance sheet for Pratt and Spider as of December 31, 2015.

PREPARE CONSOLIDATION BALANCE SHEET FOR PRATT AND SPIDER AS OF DECEMBER 31, 2015.??

Explanation / Answer

Answer:

Consideration transferred at fair value $ 4,95,000.00 Book value $ 2,65,000.00 Excess fair over book value $ 2,30,000.00 To computer software (FV-BV) $     50,000.00 To equipment $   -10,000.00 To client contract $ 1,00,000.00 To IPR & D $     40,000.00 To notes payable $     -5,000.00 Total allocation of excess fair value to specific assets and liabilities $ 1,75,000.00 Goodwill $     55,000.00

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