Mergers & Acquisitions Accounting
Please show all calculations. thanks!
Matthews Co. obtained ninety percent of the common stock of Jackson Co. on January 1, 2016. As of that date, Jackson had the following balances, and fair values, on some of its accounts:
|
Cost
|
Fair Value
|
|
Additional paid in capital
|
60,000
|
|
Buildings-net (10yr remaining useful life)
|
140,000
|
188,000
|
|
Common Stock
|
300,000
|
|
Equipment-net (8yr remaining useful life)
|
240,000
|
216,000
|
|
Inventory
|
110,000
|
130,000
|
|
Land
|
90,000
|
120,000
|
|
Long Term Liabilities (mature in 12/31/2017)
|
180,000
|
160,000
|
|
Patent (10yr remaining useful life)
|
0
|
72,000
|
During 2017 (2016), Jackson reported net income of $132,000 ($96,000) while paying dividends of $36,000 ($12,000). The retained earnings were $300,000 at the end of 2017.
Matthews Co. acquired the common stock of Jackson Co. for $585,000 in cash and incurred legal and accounting fees of $40,000 in respect of the merger. Matthews uses the equity method to account for this investment.
Required:
Prepare the consolidation journal entries for December 31, 2017.