Question

Sonny, Inc.				Pappy Corp
Balance Sheet				Balance Sheet				Cost of Acquisition					3,750,000
As of December 31 2017				For the Year Ended December 31 2017				Percentage owned	75%
Assets				Assets									25%
Cash		$                  375,000		Cash		$       937,500
Receivables (net)		1,125,000		Receivables (net)		1,500,000
Inventories		1,687,500		Inventories		1,687,500			FMV	BV	FMV-BV
Prepayments		675,000		Prepayments		1,125,000		Cash	$        375,000	$         375,000	$0
Noncurrent assets		3,375,000		Investment in securities		3,750,000		Receivables (net)	1,125,000	1,125,000	-
Liabilities and stockholders' equity				Noncurrent assets		30,000,000		Inventories	$    2,092,500	1,687,500	405,000
Current payables		$              3,000,000		Liabilities and stockholders' equity				Prepayments	$        675,000	675,000	-
Capital stock; par value of	$    20	1,000,000		Current payables		15,000,000		Noncurrent assets	$    3,847,500	3,375,000	472,500
Retained earnings		3,237,500		Capital stock; par value of	$                15	7,500,000		Current payables	(3,225,000)	(3,000,000)	(225,000)
				Retained earnings		16,500,000			$    4,890,000	$      4,237,500	$    652,500

Pappy Corp and Sonny, Inc. have entered into negotiations leading to a possible business combination.

Sonny, Inc.'s inventory has a fair value of $2,092,500, its noncurrent assets, net of depreciation, approximated $3,847,500, its

current payables were valued at $3,225,000. Initially, Pappy Corp offered to acquire all of Sonny, Inc.'s stock for $4,347,500.

However, 25% of Sonny, Inc.'s stockholders objected, because they felt that the purchase price should reflect about $240,000

of goodwill. Ultimately, Pappy Corp acquired 75% of Sonny, Inc.'s outstanding stock for $100 per share. After the acquisition was completed on Dec 31, 2017, the balance sheet was prepared for Pappy Corp

Using the above data, prepare a consolidated balance sheet working paper and a formal consolidated balance sheet

Answer 1