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Problem - Pratt Company acquired all of Spider, Inc.'s outstanding shares on December 31, 2015, for $521,150 cash. Pratt will operate Spider as a wholly owned subsidiary with a separate legal and accounting identity. 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:
Book Values
Fair Values
Computer software
$25,500
$76,750
Equipment
63,000
48,700
Client contracts
0
120,000
In-process research and development
37,250
Notes payable
(64,500)
(71,550)
At December 31, 2015, the following financial information is available for consolidation:
Pratt
Spider
Cash
$10,500
Receivables
162,500
34,500
Inventory
167,000
104,500
Investment in Spider
521,150
246,500
25,500
Buildings (net)
508,750
175,000
Equipment (net)
324,000
Goodwill
Total assets
$1,940,400
$413,000
Accounts payable
$(93,900)
$(58,000)
(533,500)
Common stock
(380,000)
(100,000)
Additional paid-in capital
(170,000)
(25,000)
Retained earnings
(763,000)
(165,500)
Total liabilities and equities
$(1,940,400)
$(413,000)
Note: Parentheses indicate a credit balance.
Prepare a consolidated balance sheet for Pratt and Spider as of December 31, 2015.
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