Good Corporation acquired 80 percent of the outstanding stock of Morning, Inc., on January 1, 2008, for $1,400,000 in cash, debt, and stock. One of Morning’s buildings, with a 10 year remaining life, was undervalued on the company’s accounting records by $80,000. Also, Morning’s newly developed unpatented technology, with an estimated 10 year life, was assessed to have a fair value of $550,000. During subsequent years, Morning reports the following:
|
Net Income |
Dividends Paid |
|
|
2008 |
$180,000 |
$100,000 |
|
2009 |
200,000 |
100,000 |
|
2010 |
300,000 |
100,000 |
|
2011 |
400,000 |
120,000 |
The following trial balances are for these two companies as of December 31, 2011. Morning owes Good $100,000 as of this date.
|
Good |
Morning |
|
|
Debits |
||
|
Cash |
$ 300,000 |
$ 200,000 |
|
Receivables |
700,000 |
400,000 |
|
Inventory |
400,000 |
500,000 |
|
Investment in Morning |
1,400,000 |
–0– |
|
Land |
700,000 |
600,000 |
|
Buildings (net) |
300,000 |
700,000 |
|
Operating expenses |
400,000 |
100,000 |
|
Dividends paid |
380,000 |
120,000 |
|
Total debits |
$4,580,000 |
$2,620,000 |
|
Liabilities |
$ 200,000 |
$ 620,000 |
|
Common stock |
1,000,000 |
460,000 |
|
Additional paid in capital |
600,000 |
40,000 |
|
Retained earnings, 1/1/11 |
1,800,000 |
1,000,000 |
|
Revenues |
884,000 |
500,000 |
|
Dividend income |
96,000 |
–0– |
|
Total credits |
$4,580,000 |
$2,620,000 |
Using the purchase method, prepare consolidated balances for this business combination for 2011.