Purchase Using Cash and Using Stock

Purchase Using Cash and Using Stock

Balance sheets for Prego Company and Sprague Company as of December 31, 2010, follow:

The fair values of Sprague Company"s assets and liabilities are equal to their book values.

Required:

Prepare a consolidated balance sheet as of January 1, 2011, under each of the following assumptions:

1. On January 1, 2011, Prego Company purchased 90% of the outstanding common stock of Sprague Company for $594,000.
2. On January 1, 2011, Prego Company exchanged 11,880 of its $20 par value common shares with a fair value of $50 per share for 90% of the outstanding common shares of Sprague Company. The transaction is a purchase.