Included on the next page is a listing of accounts

Included on the next page is a listing of accounts and account balances for Subsidiary Company as of December 31, 2020. Note that the accounts are shown in financial statement format, not a trial balance. The closing process has already been completed; the statement of financial position accounts balance. (A = L + E) The financial statements of Subsidiary Company were audited and all adjustments necessary at the end of 2020 were recorded. Effective January 1, 2021, Subsidiary Company was acquired by Parent Company for $310 million in cash. Parent Company acquired all of the outstanding common stock of Subsidiary. [And of course, the shares were purchased from existing shareholders, not from Subsidiary Company. Make sure you understand that.] Appraisal experts and others were hired to assess all of the assets and liabilities of Subsidiary Company.

Their findings are listed below: Accounts receivable should be reduced by $1,500 (time value of money adjustment).

• Inventory should be increased by $650,000 to reflect fair value. 

• Notes receivable should be increased by $2,500. 

• Land should be adjusted to reflect a total value of $5,500,000. 

• Buildings should be adjusted to reflect a total value of $50,000,000. 

• Equipment should be adjusted to reflect a total value of $79,000,000. 

• Patents/Intangibles should be adjusted to reflect a total value of $210,000,000. 

• Employee benefits payable should be increased by $350,000. 

• Long-term debt should be increased by $4,500,000. 

• Pension and other liabilities should be increased by $2,800,000.

1. Create a spreadsheet to show the adjusted accounts for Subsidiary Company, reflecting its acquisition by Parent Company. We will use “push-down” accounting and include all acquisition adjustments on the financial statements of Subsidiary Company.

2. Record (in your spreadsheet) all of the acquisition adjustments (using the information above). You will need to calculate goodwill after you have recorded all of the adjustments needed to reflect acquisition. Make sure your adjusted statement of financial position balances!