on december 31 year 1 the condensed balance sheets for ont limited and nb inc were a 737186
On December 31, Year 1, the condensed balance sheets for ONT Limited and NB Inc. were as follows:
|
|
ONT |
NB |
|
Assets: |
|
|
|
Cash |
$ 44,000 |
$ 80,000 |
|
Accounts receivable |
480,000 |
420,000 |
|
Inventories |
650,000 |
540,000 |
|
Property, plant & equipment |
2,610,000 |
870,000 |
|
Accumulated depreciation |
(1,270,000) |
(130,000) |
|
|
$2,514,000 |
$1,780,000 |
|
Liabilities: |
|
|
|
Current liabilities |
$ 660,000 |
$ 560,000 |
|
Bonds payable |
820,000 |
490,000 |
|
|
1,480,000 |
1,050,000 |
|
Shareholders’ equity: |
||
|
Common shares |
200,000 |
400,000 |
|
Retained earnings |
834,000 |
330,000 |
|
|
1,034,000 |
730,000 |
|
|
$2,514,000 |
$1,780,000 |
The fair value of all of NB’s assets and liabilities were equal to their carrying amounts except for the following:
|
Asset |
Carrying amount |
Fair value |
|
Inventories |
$540,000 |
$570,000 |
|
Property, plant & equipment |
740,000 |
790,000 |
|
Bonds payable |
490,000 |
550,000 |
Required:
(a) Assume that on January 1, Year 2, ONT acquired all of NB’s net assets by issuing new common shares with a fair value of $1,000,000. This was the only transaction on this day.
(i) Prepare the journal entry on ONT’s book to record the purchase of NB’s net assets.
(ii) Prepare a balance sheet for ONT at January 1, Year 2, after recording the purchase of NB’s net assets.
(b) Ignore part (a). Assume instead that on January 1, Year 2, ONT acquired all of NB’s common shares by issuing new common shares with a fair value of $1,000,000. This was the only transaction on this day.
(i) Prepare the journal entry on ONT’s book to record the purchase of NB’s common shares.
(ii) Prepare a schedule to calculate and allocate the acquisition differential.
(iii) Prepare a consolidated balance sheet for ONT and its subsidiary at January 1, Year 2, after recording the purchase of NB’s common shares.
(c) What are the similarities and differences between the balance sheets in parts
(a) and (b)?