Consolidation Accounting After an intense period of negotiation, Global Enterprises Corporation agreed to purchase all...
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Accounting
Consolidation Accounting
After an intense period of negotiation, Global Enterprises Corporation agreed to purchase all of the outstanding common shares of The Carlton Corporation. The agreed-upon price was $29.4 million, payable in Global Enterprise shares. According to the agreement, Global Enterprises would issue one share of its common stock in exchange for each share of The Carlton Corporation. Following the exchange, The Carlton Corporation would become a wholly-owned subsidiary of Global Enterprises. At the time of the negotiations, the market price of Global Enterprises shares was $24.50 per share. Presented below are the pre-acquisition balance sheets of Global Enterprises and The Carlton Corporation:
Pre-acquisition Balance Sheets
Global Enterprises Corporation
The Carlton Corporation
Assets
Cash
$ 8,000,000
$ 2,500,000
Short-term investments
5,000,000
3,500,000
Accounts receivable (net)
7,500,000
5,000,000
Inventory (LIFO)
19,000,000
9,500,000
Property & equipment (net)
38,000,000
23,000,000
Other assets
4,500,000
1,500,000
Total assets
$82,000,000
$45,000,000
Liabilities & Shareholders' Equity
Accounts payable
$ 9,500,000
$ 7,500,000
Other current liabilities
4,000,000
3,000,000
Bonds payable
11,000,000
----
Other long-term debt
7,500,000
12,500,000
Common stock ($10 par)
12,000,000
----
Common stock ($5 par)
----
6,000,000
Capital in excess of par value
7,000,000
2,000,000
Retained earnings
31,000,000
14,000,000
Total liabilities & shareholders' equity
$82,000,000
$45,000,000
As part of Global Enterprises due diligence, the company determined that while the liabilities of The Carlton Corporation were fairly valued, some of the companys assets were not fairly valued. The fair value of Carltons assets were as follows:
Asset
Fair Maket Value
Under/(Over) Statement
Cash
$ 2,500,000
$ 0
Short-term investments
4,500,000
1,000,000
Accounts receivable (net)
3,500,000
(1,500,000)
Inventory (LIFO)
13,000,000
3,500,000
Property & equipment (net)
28,000,000
5,000,000
Other assets
0
(1,500,000)
Total
$51,500,000
$6,500,000
Required
Prepare the consolidated balance sheet immediately following the acquisition using consolidation accounting.
Remember to use a negative sign with adjustment answers, when appropriate.
Pre-Consolidation
Global Enterprises
The Carlton Corp.
Adjustments
Consolidated
Cash
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Short-term investments
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Accounts receivable (net)
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Inventory (LIFO)
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Property & equipment (net)
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Other assets
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Investment in Carlton
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Goodwill
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Total
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Liabilities & Shareholders' Equity
Accounts payable
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Other current liabilities
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Bonds payable
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Other long-term debt
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Common stock ($10 par)
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Common stock ($5 par)
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Capital in excess of par value
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Retained earnings
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Total
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Answer & Explanation
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