Problem 2-40 (Algo) (LO 2-10)
On May 1, Burns Corporation acquired 100 percent of the outstanding ownership shares of Quigley Corporation in exchange for
$730,000 cash. At the acquisition date, Quigley's book and fair values were as follows:
Items
Book Value
Fair Value
Cash
$ 141,500
$ 141,500
Receivables
235,000
235,000
Inventory
297,000
372,000
Land
159,000
114,000
Building and equipment (net)
285,000
370,000
Patented technology
0
220,000
Total assets
$ 1,117,500
$ 1,452,500
Accounts payable
$ 140,500
$ 140,500
Long-term liabilities
704,000
704,000
Common stock ($5 par value)
210,000
0
Additional paid-in capital
90,000
0
Retained earnings
(27,000)
0
Total liabilities and stockholders' equity
$ 1,117,500
0
Burns directs Quigley to seek additional financing for expansion through a new long-term debt issue. Consequently, Quigley will issue
a set of financial statements separate from that of its new parent to support its request for debt and accompanying regulatory filings.
Quigley elects to apply pushdown accounting in order to show recent fair valuations for its assets.
Required:
Prepare a separate acquisition-date balance sheet for Quigley Corporation using pushdown accounting.
Note: Input all amounts as positive values.