70.2K

Verified Solution

Link Copied!

On January 1, 2015, Casey Corporation exchanged $3,218,000 cash for 100 percent of the outstanding voting stock of Kennedy Corporation. Casey plans to maintain Kennedy as a wholly owned subsidiary with separate legal status and accounting information systems.

At the acquisition date, Casey prepared the following fair-value allocation schedule:

Fair value of Kennedy (consideration transferred)				$	3,218,000
Carrying amount acquired					2,600,000
Excess fair value				$	618,000
to buildings (undervalued)	$	360,000
to licensing agreements (overvalued)		(162,000)			198,000
to goodwill (indefinite life)				$	420,000

Immediately after closing the transaction, Casey and Kennedy prepared the following postacquisition balance sheets from their separate financial records.

Accounts	Casey				Kennedy
Cash	$	522,000			$	179,250
Accounts receivable		1,430,000				309,000
Inventory		1,645,000				170,750
Investment in Kennedy		3,218,000				0
Buildings (net)		5,977,500				2,180,000
Licensing agreements		0				3,050,000
Goodwill		128,500				0
Total assets	$	12,921,000			$	5,889,000
Accounts payable		(381,000	)			(389,000	)
Long-term debt		(3,540,000	)			(2,900,000	)
Common stock		(3,000,000	)			(1,000,000	)
Additional paid-in capital		0				(500,000	)
Retained earnings		(6,000,000	)			(1,100,000	)
Total liabilities and equities	$	(12,921,000	)		$	(5,889,000	)

Prepare a January 1, 2015, consolidated balance sheet for Casey Corporation and its subsidiary Kennedy Corporation.

Answer & Explanation Solved by verified expert

See Answer