Maurice Tutor
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On January 1, 2011, Pinnacle Corporation exchanged $3,200,000 cash for 100 percent of the outstanding voting stock of Strata Corporation. Pinnacle plans to maintain Strata as a wholly owned subsidiary with separate legal status and accounting information systems. At the acquisition date, Pinnacle prepared the following fair-value allocation schedule:
|
Fair value of Strata (consideration transferred) |
$3,200,000 |
|
|
Carrying amount acquired |
2,600,000 |
|
|
Excess fair value |
$600,000 |
|
|
to buildings (undervalued) |
$300,000 |
|
|
to licensing agreements (overvalued) |
100,000 |
200,000 |
|
to goodwill (indefinite life) |
$400,000 |
Immediately after closing the transaction, Pinnacle and Strata prepared the following post-acquisition balance sheets from their separate financial records.
|
Pinnacle |
Strata |
|
|
Cash |
$433,000 |
$122,000 |
|
Accounts receivable |
1,210,000 |
283,000 |
|
Inventory |
1,235,000 |
350,000 |
|
Investment in Strata |
3,200,000 |
–0– |
|
Buildings (net) |
5,572,000 |
1,845,000 |
|
Licensing agreements |
–0– |
3,000,000 |
|
Goodwill |
350,000 |
–0– |
|
Total Assets |
$12,000,000 |
$5,600,000 |
|
Accounts payable |
300,000 |
375,000 |
|
Long-term debt |
2,700,000 |
2,625,000 |
|
Common stock |
3,000,000 |
1,000,000 |
|
APIC |
–0– |
500,000 |
|
Retained earnings |
6,000,000 |
1,100,000 |
|
Total liabilities and equities |
($12,000,000) |
($5,600,000) |
Prepare a January 1, 2011, consolidated balance sheet for Pinnacle Corporation and its subsidiary Strata Corporation.