BookValues
FairValues
Computer software
$
65,500
$
120,750
Equipment
82,500
68,100
Client contracts
0
129,000
In-process research and development
0
30,250
Notes payable
(90,400)
(95,400)
At December 31,2015, the following financial information is available forconsolidation:
Pratt
Spider
Cash
$
13,700
$
21,400
Receivables
140,500
41,500
Inventory
144,500
79,500
Investment in Spider
513,100
0
Computer software
229,000
65,500
Buildings (net)
569,000
130,000
Equipment (net)
366,000
82,500
Client contracts
0
0
Goodwill
0
0
Total assets
$
1,975,800
$
420,400
Accounts payable
$
(93,300)
$
(59,500)
Notes payable
(525,500)
(90,400)
Common stock
(380,000)
(100,000)
Additional paid-in capital
(170,000)
(25,000)
Retained earnings
(807,000)
(145,500)
Total liabilities and equities
$
(1,975,800)
$
(420,400)
Note: Parentheses indicate a credit balance.
Prepare a consolidated balance sheet for Pratt and Spider as ofDecember 31, 2015.
Pratt Company acquired all of Spider, Inc.’s outstanding shareson December 31, 2015, for $513,100 cash. Pratt will operate Spideras a wholly owned subsidiary with a separate legal and accountingidentity. Although many of Spider’s book values approximate fairvalues, several of its accounts have fair values that differ frombook values. In addition, Spider has internally developed assetsthat remain unrecorded on its books. In deriving the acquisitionprice, Pratt assessed Spider’s fair and book value differences asfollows:
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