Constructing the Consolidated Balance Sheet at Acquisition
On January 1 of the current year, Healy Company purchased all of the common shares of Miller Company for $500,000 cash. Balance sheets of the two firms immediately after the acquisition follow:
During purchase negotiations, Miller’s plant assets were appraised at $425,000 and all of its remaining assets and liabilities were appraised at values approximating their book values. Healy also concluded that an additional $75,000 (for goodwill) demanded by Miller’s shareholders was warranted because Miller’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.
| Healy
Company |
Miller
Company |
Consolidating
Adjustments |
Consolidated
Balance Sheet |
|
| Current assets | $1,800,000 | $90,000 | Answer 0
|
$Answer 1890000
|
| Investment in Miller | 500,000 | – | Answer -50000
|
Answer 0
|
| Plant assets, net | 3,000,000 | 410,000 | Answer 15000
|
Answer 3425000
|
| Goodwill | – | – | Answer 75000
|
Answer 75000
|
| Total assets | $5,300,000 | $500,000 | $Answer 5390000
|
|
| Liabilities | $ 700,000 | $ 90,000 | Answer 0
|
$Answer 790000
|
| Contributed capital | 3,600,000 | 370,000 | Answer 370000
|
Answer 3600000
|
| Retained earnings | 1,000,000 | 40,000 | Answer -40000
|
Answer 1000000
|
| Total liabilities & stockholders’ equity | $5,300,000 | $500,000 | $Answer 5390000
|