ACC 4700 Advanced Accounting

ACC 4700 Advanced Accounting

The following are preliminary financial statements for Red Co. and Orange Co. for the year ending December 31, 2013 prior to Red's acquisition of Orange.

On December 31, 2013 (subsequent to the preceding statements), Red exchanged 10,000 shares of its $10 par value common stock for all of the outstanding shares of Orange. Red's stock on that date has a fair value of $60 per share. Red was willing to issue 10,000 shares of stock because Orange's land was appraised at $200,000. Red also paid $14,000 to several attorneys and accountants who assisted in creating this combination.

#1 Compute the value of the Goodwill account on the date of acquisition, 12/31/2013.

Consideration given

Book value acquired

Excess consideration given over book value

Allocations

Excess cost not identified - Goodwill

#2 Prepare Red Co.'s entry to record the acquisition.

#3  Assuming that these two companies retained their separate legal identities, prepare a consolidation worksheet as of December 31, 2013 after the acquisition transaction is completed. 

Account

Income Statement  

Sales   

Expenses   

Net income  

Statement of Retained Earnings

Retained earnings, 1/1/2013

Net income (above)  

Dividends paid  

Retained earnings, 12/31/2013

Balance Sheet  

Current asets  

Investment in Orange Co.

Land   

Buildings (net)  

Goodwill   

Total assets  

Liabilities   

Common stock  

Additional paid-in capital

Retain earnings, 12/31/2013

Total liabilities and stockholders' equity