Problem VI Alutto Consolidated
On June 30, 2012, Alutto Corporation gained control of Poon Industries by purchasing 60 percent of Poon's outstanding $5 par value common stock for $9 per share. On that date, Poon Industries owed Alutto Corporation $15,000 it had borrowed by giving a promissory note to Alutto. Alutto Corporation owed Poon Industries $7,000 for merchandise purchased on account during June 2012. At the time of purchase, the book value of Poon's assets and liabilities approximated fair value.
The condensed balance sheet for Alutto Corporation as of June 30, 2012 (after the investment in Poon Industries was recorded) appears below. Assume that all Poon Industries' stock was originally issued at $5 per share.
Alutto Corporation
Balance Sheet as of June 30, 2012
|
Cash
|
$ 10,000
|
|
Accounts receivable (net)
|
22,000
|
|
Notes receivable
|
15,000
|
|
Inventories
|
15,000
|
|
Investment in Poon Industries
|
54,000
|
|
Equipment (net)
|
70,000
|
|
Buildings and land (net)
|
140,000
|
|
Total assets
|
$326,000
|
|
|
|
|
Accounts payable
|
$ 17,000
|
|
Common stock
|
183,000
|
|
Retained earnings
|
126,000
|
|
Total liabilities and equities
|
$326,000
|
Alutto Consolidated uses the "entity" method of accounting for subsidiaries.The condensed consolidated balance sheet for Alutto Consolidated (including its subsidiary) as of June 30, 2012 appears below:
Alutto Consolidated
Balance Sheet as of June 30, 2012
|
Cash
|
$ 19,000
|
|
Accounts receivable (net)
|
39,000
|
|
Notes receivable
|
15,000
|
|
Inventories
|
31,000
|
|
Equipment (net)
|
145,000
|
|
Buildings and land (net)
|
190,000
|
|
Goodwill
|
10,000
|
|
Total assets
|
$449,000
|
|
|
|
|
Accounts payable
|
$ 27,000
|
|
Mortgage payable
|
77,000
|
|
Noncontrolling interest
|
36,000
|
|
Common stock
|
183,000
|
|
Retained earnings
|
126,000
|
|
Total liabilities and equities
|
$449,000
|
REQUIRED:
Prepare Poon Industries' balance sheet as of June 30, 2012 on the answer sheet presented on the next page. If an account should not appear on Poon's balance sheet, put XXX in the blank for the account on the answer sheet.
Hint 1: How many shares of Poon Industries did Alutto purchase on June 30, 2012?
Hint 2: Using your answer to Hint 1, how many shares of Poon Industries have been issued?
Hint 3: Using your answer to Hint 2, what is the balance in Poon's Common Stock account on June 30, 2012?