Purchase Using Cash and Using Stock
cybacatx
purchase_using_cash_and_using_stock.docxPurchase Using Cash and Using Stock
Balance sheets for Prego Company and Sprague Company as of December 31, 2010, follow:
|
|
Argo Company |
Sprague Company |
|
Cash |
$ 700,000 |
$111,000 |
|
Accounts receivable (net) |
892,000 |
230,000 |
|
Inventory |
544,000 |
60,000 |
|
Property and equipment (net) |
$1,927,000 |
$468,000 |
|
Land |
120,000 |
94,000 |
|
Total assets |
$4,183,000 |
$963,000 |
|
Accounts payable |
$ 302,000 |
$152,000 |
|
Notes payable |
588,000 |
61,000 |
|
Long-tenn debt |
350,000 |
90,000 |
|
Common stock |
1,800,000 |
500,000 |
|
Other contributed capital |
543,000 |
80,000 |
|
Retained earnings |
600,000 |
80,000 |
|
Total equities |
$4,183,000 |
$963,000 |
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.
