Pappy Corp and Sonny, Inc. have entered into negotiations leading to a possible business combination. As of December 31, 2015, Sonny, Inc. condensed balance sheet was as follows:
as of december 31, 2015
Assets: Cash $187,500, Receivables (net) 750,000, Inventories 2,250,000, Prepayments 562,500, Noncurrent assets 3,375,000, Total assets $7,125,000
Liabilities and stockholders’ equity: Current payables 43,562,500, Capital stock; par value of 30 $1,200,000, Retained earnings 2,362,500, Total equities 7,125,000
Sonny, Inc.’s inventory has a fair value of $2,700,000, its noncurrent assets, net of depreciation, approximated $3,712,500, its current payables were valued at $3,740,625.
Initially, Pappy Corp offered to acquire all of Sonny, Inc.’s stock for $4,392,500. However, 25% of Sonny, Inc.’s stockholders objected, because they felt that the purchase price should reflect about $2,070,000 of goodwill. Ultimately, Pappy Corp acquired 75% of Sonny, Inc.’s outstanding stock for $125 per share. After the acquisition was completed on Dec 31, 2015, the following balance sheet was prepared for Pappy Corp:
for the year ended december 31, 2015
Assets: Cash 1,125,000, Receivables (net) 1,687,500, Inventories 2,062,500, Prepayments 1,312,500, Investment in securities 3,750,000, Noncurrent assets 33,750,000, Total assets 43,687,500
Liabilities and stockholders’ equity: Current payables 18,750,000, Capital stock; par value of 15 $ 7,500,000, Retained earnings 17,437,500, Total equities 43,687,500
1.) Using the above data and Excel, prepare a consolidated balance sheet working paper as of December 31, 2015. Be sure all input data is in a separate part of the schedule so that the solution will change with changes of the input.
2.)By linking to the work paper prepared in part 1, prepare a formal consolidated balance sheet as of December 31, 2015.
Please show how you got your answers. Thank you