Question: Mendol Corporation purchased 100% of the common stock of Carbury Inc. on January 2, 2014. Carnac's balance sheet on January 2, 2014 was as follows:
|
Accounts receivable-net
|
$180,000
|
Current liabilities
|
$70,000
|
|
Inventory
|
360,000
|
Long term debt
|
160,000
|
|
Land
|
40,000
|
Common stock ($1 par)
|
20,000
|
|
Building-net
|
60,000
|
Paid-in capital
|
430,000
|
|
Equipment-net
|
80,000
|
Retained earnings
|
40,000
|
|
Total Assets
|
$720,000
|
Total Liabilities & Equity
|
$720,000
|
Fair values agree with book values except for inventory, land, and equipment that have fair values of $400,000, $50,000 and $70,000, respectively. Carbury has unrecorded patent rights valued at $20,000.
Required:
a. Prepare a schedule to allocate the purchase price to Carbury's assets and liabilities assuming Mendol paid $560,000 cash for the acquisition.
b. Prepare the consolidation worksheet with entries for a January 2, 2014 consolidated balance sheet.