Reference no: EM132488418

On January 1, 2015, Marshall Company acquired 100 percent of the outstanding common stock of Tucker Company. To acquire these shares, Marshall issued $207,850 in long-term liabilities and 22,000 shares of common stock having a par value of $1 per share but a fair value of $10 per share. Marshall paid $40,200 to accountants, lawyers, and brokers for assistance in the acquisition and another $14,250 in connection with stock issuance costs.

Prior to these transactions, the balance sheets for the two companies were as follows:

                                       Marshall Company     Tucker Company

                                     Book Value                    Book Value

Cash                             $76,000                         $30,850

Receivables                     319,000                            102,150

Inventory                       371,000                                210,000

Land                             206,000                               224,000

Buildings (net)                449,000                                 237,000

Equipment (net)                207,000                             52,000

Accounts payable             (240,000)                          (64,000)

Long-term liabilities          (466,000)                        (280,000)

Common stock-$1 par value (110,000)

Common stock-$20 par value (120,000)

Additional paid-in capital     (360,000 )                         0

Retained earnings, 1/1/15    (452,000)                      (392,000)

Note: Parentheses indicate a credit balance.

Point 1: In Marshall's appraisal of Tucker, it deemed three accounts to be undervalued on the subsidiary's books: Inventory by $7,250, Land by $31,150, and Buildings by $36,450. Marshall plans to maintain Tucker's separate legal identity and to operate Tucker as a wholly owned subsidiary.

Question a. Determine the amounts that Marshall Company would report in its postacquisition balance sheet. In preparing the post acquisition balance sheet, any required adjustments to income accounts from the acquisition should be closed to Marshall's retained earnings.

Question b. Make a worksheet to consolidate the balance sheets of these two companies as of January 1, 2015. (For accounts where multiple consolidation entries are required, combine all debit entries into one amount and enter this amount in the debit column of the worksheet. Similarly, combine all credit entries into one amount and enter this amount in the credit column of the worksheet.)