On January 1, 2018, Casey Corporation exchanged $3,258,000 cash for 100 percent of the outstanding voting stock of Kennedy Corporation. Casey plans to maintain Kennedy as a wholly-owned subsidiary with separate legal status and accounting Information systems. At the acquisition date, Casey prepared the following fair-value allocation schedule:
Fair value of Kennedy (consideration transferred) $3,258,000
Carrying amount acquired 2,600,000
Excess fair value $658,000
to buildings (undervalued) $358,000
to licensing agreements (overvalued) (135,000) 223,000
to goodwill (indefinite life) $435,000
Immediately after closing the transaction, Casey and Kennedy prepared the following post acquisition balance sheets from their separate financial records.
Accounts Casey Kennedy
Cash 433,000 $142,500
Accounts receivable 1,275,000 311,000
Inventory 1,705,000 246,500
Investment in Kennedy 3,258,000 0
Buildings (net) 5,857,500 2,340,000
Licensing agreements 0 3,370,000
Goodwill 256,500 0
Total assets $12,785,000 $6,410,000
Accounts payable $(395,000) $(470,000)
Long-term debt (3,390,000) (3,340,000)
Common stock (3,000,000) (1,000,000)
Additional paid-in capital 0 (500,000)
Retained earnings (6,000,000) (1,100,000)
Total liabilities and equities$(12,785,000) $(6,410,000)
Prepare an acquisition-date consolidated balance sheet for Casey Corporation and its subsidiary Kennedy Corporation.