Petunia Corporation acquired 100 percent of Sylvester Company stock on January 1, 2023 for $1,142,200 cash.
Following are pre-closing trial balance amounts for Petunia Corporation and Sylvester Company as of December 31, 2023:
PETUNIA CORPORATION
Debit Credit
Cash $451,600
Accounts Receivable $294,000
Inventory $473,000
Investment in Sylvester Corp. $1,212,100
Buildings $625,000
Land $807,000
Equipment $315,000
Cost of Goods Sold $342,000
Depreciation Expense, Building $58,600
Depreciation Expense $41,300
Selling & Administrative $159,000
Dividends Declared $80,000
Accumulated Depreciation $231,500
Accounts Payable $178,000
Bonds Payable $540,000
Common Stock ($1 par) $659,000
Additional Paid In Capital $1,474,800
Retained Earnings (01/01/2023) $788,500
Sales $720,800
Income from Sylvester Corp. $119,900
SYLVESTER COMPANY
Debit Credit
Cash $235,700
Accounts Receivable $217,800
Inventory $210,000
Buildings $229,500
Land $281,000
Equipment $345,000
Cost of Goods Sold $207,000
Depreciation Expense $21,600
Depreciation Expense $32,500
Selling & Administrative $119,600
Dividends Declared $50,000
Accumulated Depreciation $108,000
Accounts Payable $193,600
Bonds Payable $108,400
Common Stock ($1 par) $181,000
Additional Paid In Capital $434,000
Retained Earnings (01/01/2023) $260,000
Sales $534,700
Income from Sylvester Corp. $1,949,700
Additional Information:
On January 1, 2023, the fair market value of Sylvester's assets equaled their book value with the exception of: Inventory - was overvalued by $6,800 (all this inventory was sold during 2023). Building - was overvalued by $29,000 (remaining useful life was estimated to be 10 years). Land - was undervalued by $84,000. Equipment - was undervalued by $93,000 (remaining useful life was estimated to be 5 years). The new Goodwill from the acquisition was impaired by $25,200 at year-end.
