Need assistance on how to compute! Please show work, thank you! Constructing the

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Need assistance on how to compute! Please show work, thank you!

Constructing the Consolidated Balance Sheet at Acquisition On January 1 of the current year, Liu Company purchased all of the common shares of Reed Company for $380,000 cash. Balance sheets of the two firms immediately after the acquisition follow During purchase negotiations, Reed's PPE were appraised at $332,000 and all of its remaining assets and liabilities were appraised at values approximating their book values. Liu also concluded that an additional $33,000 (for goodwill) demanded by Reed's shareholders was warranted because Reed's earning power was better than the industry average Prepare the consolidating adjustments and the consolidated balance sheet at acquisition Use negative signs with consolidating adjustment answers, when appropriate Liu Reed Consolidating Adjustments Consolidated Balance Sheet Company Company Current assets $950,000 $70,000 Investment in Reed 380,000 PPE, net 1,600,000 305,000 Goodwill Total assets $2,930,000 $375,000 Liabilities $450,000 $55,000 Contributed capital 1,850,000 280,000 Retained earnings 630,000 40,000 $2,930,000 $375,000 Total liabilities & stockholders' equity

Explanation / Answer

Note:- Increase in PPE,net = 332000 - 305000

   = 27000

Liu Reed Consolidated Adjustment Consolidated Balance sheet Current Assets 950000 70000 0 1020000 Investment in Reed 380000 0 (380000) 0 PPE, net 1600000 305000 27000 1932000 Goodwill 0 0 33000 33000 Total assets 2930000 375000 2985000 Liabilities 450000 55000 0 505000 Contributed capital 1850000 280000 (280000) 1850000 Retained Earnings 630000 40000 (40000) 630000 Total liabilities and Shareholder's equity 2930000 375000 2985000

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