Answered Essay: Immediately following an acquisition, the alpha company's (the parent company# balance sheet included cash $50,000,

Immediately following an acquisition, the alpha company’s (the parent company# balance sheet included cash $50,000, investment in subsidiary $200,000, plant assets $450,000, and liabilities of $150,000. Bravo-Zulu Company, #The wholly owned subsidiary) had cash $75,000, plant assets $145,000, and liabilities $60,000. All balance are normal. There are no other assets of liabilities, and the given values for the subsidiary are also equal to their fair values. Use the information to determine the dollar value of Alpha Company’s: 1. Goodwill, 2 total assets before Consolidation. 3. Total Liabilities after Consolidation. 4 total Assets after consolidation

Expert Answer

 

Answer:

First of all we will make table for the Fair value of the susidiary assets as under

Amount $
Cash 75,000
Plant Assets 145,000
Total Assets 220,000
Less:
Liabelity 60,000
Net book Value of the subsidiary 160,000

It is given in the question that,

investment in subsidiary =$200,000,

So goodwill

= investment in subsidiary -Fair value

=200,000-160,000

=40,000

______________________________________________

Total Assets Before consolidation
Assets
Cash 50,000
Investment in subsidiary 200,000
Plant Assets 450,000
Goodwill 40,000
740,000

Total Assets Before consolidation= $740,000

______________________________________________________________________

Total liability After consolidation
Assets
Liability of alpha 150,000
Liability of Bravo 60,000
Total Liability 210,000

Total liability After consolidation= $210,000

_____________________________________________________________

Total Assets after consolidation
Assets
Cash od alpha 50,000
Bravo assets ( 75000+145000) 220,000
Plant Assets of alpha 450,000
Goodwill 40,000
Total Assets after consolidation 760,000

Total Assets after consolidation =$760,000

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