On January 1, 2024, Presidio Company acquired 100 percent of the outstanding common stock of Mason Company. To acquire these shares, Presidio issued to the owners of Mason $329,000 in long-term liabilities and 20,000 shares of common stock having a par value of $1 per share but a fair value of $10 per share. Presidio paid $32,500 to accountants, lawyers, and brokers for assistance in the acquisition and another $17,000 in connection with stock Issuance costs. Prior to these transactions, the balance sheets for the two companies were as follows: Cash Presidio Company Mason Company $ 36,200 Items $ 81,900 Receivables 290,000 151,000 Inventory 378,000 178,000 Land 284,000 272,000 Buildings (net) 469,000 280,000 Equipment (net) 194,000 71,100 Accounts payable (179,000) (47,700) Long-term liabilities Common stock-$1 par value Common stock-$20 par value Additional paid-in capital Retained earnings, 1/1/24 (462,000) (329,000) (110,000) 0 (120,000) (360,000) (585,900) (491,600) Note: Parentheses indicate a credit balance. Presidio's appraisal of Mason's fair values deemed three accounts to be undervalued: Inventory by $5,300, Land by $33,400, and Buildings by $34,000. Presidio plans to maintain Mason's separate legal identity and to operate Mason as a wholly owned subsidiary.
On January 1, 2024, Presidio Company acquired 100 percent of the outstanding common stock of Mason Company. To acquire these shares, Presidio issued to the owners of Mason $329,000 in long-term liabilities and 20,000 shares of common stock having a par value of $1 per share but a fair value of $10 per share. Presidio paid $32,500 to accountants, lawyers, and brokers for assistance in the acquisition and another $17,000 in connection with stock Issuance costs. Prior to these transactions, the balance sheets for the two companies were as follows: Cash Presidio Company Mason Company $ 36,200 Items $ 81,900 Receivables 290,000 151,000 Inventory 378,000 178,000 Land 284,000 272,000 Buildings (net) 469,000 280,000 Equipment (net) 194,000 71,100 Accounts payable (179,000) (47,700) Long-term liabilities Common stock-$1 par value Common stock-$20 par value Additional paid-in capital Retained earnings, 1/1/24 (462,000) (329,000) (110,000) 0 (120,000) (360,000) (585,900) (491,600) Note: Parentheses indicate a credit balance. Presidio's appraisal of Mason's fair values deemed three accounts to be undervalued: Inventory by $5,300, Land by $33,400, and Buildings by $34,000. Presidio plans to maintain Mason's separate legal identity and to operate Mason as a wholly owned subsidiary.
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
ChapterA2: Investments
Section: Chapter Questions
Problem 25E
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Transcribed Image Text:On January 1, 2024, Presidio Company acquired 100 percent of the outstanding common stock of Mason Company. To
acquire these shares, Presidio Issued to the owners of Mason $329,000 in long-term liabilities and 20,000 shares of
common stock having a par value of $1 per share but a fair value of $10 per share. Presidio paid $32,500 to
accountants, lawyers, and brokers for assistance in the acquisition and another $17,000 in connection with stock
Issuance costs.
Prior to these transactions, the balance sheets for the two companies were as follows:
Cash
Presidio
Company
Mason
Company
$ 36,200
Items
$ 81,900
Receivables
290,000
151,000
Inventory
378,000
178,000
Land
284,000
272,000
Buildings (net)
469,000
280,000
Equipment (net)
194,000
71,100
Accounts payable
(179,000)
(47,700)
Long-term
liabilities
Common stock-$1 par
value
Common stock-$20 par
value
Additional paid-in
capital
Retained earnings,
1/1/24
(462,000) (329,000)
(110,000)
в
0 (120,000)
(360,000)
(585,900) (491,600)
Note: Parentheses indicate a credit balance.
Presidio's appraisal of Mason's fair values deemed three accounts to be undervalued: Inventory by $5,300, Land by
$33,400, and Buildings by $34,000. Presidio plans to maintain Mason's separate legal identity and to operate Mason as
a wholly owned subsidiary.
Transcribed Image Text:a. Prepare Presidio's journal entries to record its acquisition of Mason, related professional fees paid, and stock
acquisition costs.
b. Separately determine each individual amount that Presidio Company would report in its consolidated balance sheet
following the acquisition of Mason. Include in Presidio's retained earnings any adjustments to income accounts from
part (a).
c. To verify the answers found in part (b), adjust Presidio's column of accounts for the journal entries in part (a) and then
prepare a worksheet to consolidate the balance sheets of these two companies at the acquisition date.
Complete this question by entering your answers in the tabs below.
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A
B
с
Prepare Presidio's journal entries to record its acquisition of Mason, related professional fees paid,
and stock acquisition costs.
Note: If no entry is required for a transaction/event, select "No journal entry required" in the first
account field.
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Journal entry worksheet
1
2
3
Record the acquisition of Mason Company.
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