Preparation of Consolidated Balance Sheet at Acquisition Date
On January 1, 1999,Tipper Company purchased all of Albert Inc.’s outstanding stock. The post-combination balance sheets of both firms are listed below (dollars in millions):
|
Tipper Company |
Albert Inc. |
|
|
Cash |
$ 20 |
$ 5 |
|
Accounts receivable |
120 |
65 |
|
Other assets |
950 |
330 |
|
Investment in Albert, Inc. |
410 |
— |
|
Total assets |
$1500 |
$400 |
|
Liabilities |
$650 |
160 |
|
Shareholders’ equity |
850 |
240 |
|
Total liabilities and shareholders’ equity |
$1500 |
$400 |
Additional information:
1. On the date of acquisition, Albert Inc.’s other assets had a fair market value of $380 million. All other components of net assets had fair market values approximately equal to book values.
2. Albert’s accounts receivable include $25 million that is due from Tipper Company.
Required
a. Assume that Tipper Company will report a consolidated balance sheet on January 1, 1999. Indicate how each of the following items would be valued in the consolidated statement:
- Accounts receivable
- Other assets
- Investment in Albert Inc.
- Goodwill
- Liabilities
- Shareholders’ equity