Simon Grand

Balance sheet January 1, 2017 Company Company

Assets
Cash $ 220,000 $50,000
Accounts receivable 450,000 120,000
Inventories 600,000 150,000
Other current assets 80,000 20,000
Total current assets 1,350,000 340,000

Plant property and equipment 1,400,000 800,000

Accumulation depreciation -400,000 -150,000
Goodwill 325,000 0
Brand name 50,000 0
Investment 500,000 0
Customer relationship, net 25,000 0
Total long term assets 1,900,000 650,000
Total assets $ 3,250,000 $ 990,000

Liabilities and Shareholders' Equity

Liabilities
Accounts payable 700,000 200,000
Accrued liabilities 300,000 75000
Current portion of debt 50,000 10,000
Total current liabilities 1,050,000 285,000
Total long term debt 1,500,000 315,000
Total liabilities 2,550,000 600,000
Shareholders' Equity
Common stock 100,000 50,000
Additional paid in capital 75,000 25,000
Retained earnings 525,000 315,000
Total shareholders' equity 700,000 390,000
Total liabilities and shareholders' equity $ 3,250,000 $ 990,000

On January 1, 2017, Simon acquired Grand for $500,000. The carrying value of all assets and liabilities were the same as fair value except for
customer relationship of $50,000 which has a 5 year life.

Step 1 is to compute the goodwill and consolidate Simon and Grand at the acquisition date.
 Simon Grand Simon Grand
Balance sheet December 31, 2017 Company Company Income statement for 2017 Company Company

Assets Revenues $ 4,000,000 $ 1,500,000

Cash $ 180,000 $60,000 Cost of Sales 3,500,000 1,200,000
Accounts receivable 425,000 125,000 Selling General and Administrative 300,000 220,000
Inventories 525,000 145,000 Interest Expense 120,000 30,000
Other current assets 90,000 15,000 Equity in subsidiary 20,000 0
Total current assets 1,220,000 345,000 Tax Expense 40,000 20,000
Net income $ 60,000 $ 30,000
Plant property and equipment 1,500,000 850,000
Accumulation depreciation -450,000 -180,000
Goodwill 325,000 0
Brand name 50,000 0
Investment 520,000 0
Customer relationship, net 20,000 0
Total long term assets 1,965,000 670,000
Total assets $ 3,185,000 $ 1,015,000

Liabilities and Shareholders' Equity

Liabilities
Accounts payable 595,000 200,000
Accrued liabilities 280,000 85,000
Current portion of debt 50,000 10,000
Total current liabilities 925,000 295,000
Total long term debt 1,500,000 300,000
Total liabilities 2,425,000 595,000
Shareholders' Equity
Common stock 100,000 50,000
Additional paid in capital 75,000 25,000
Retained earnings 585,000 345,000
Total shareholders' equity 760,000 420,000
Total liabilities and shareholders' equity $ 3,185,000 $ 1,015,000

On January 1, 2017, Simon acquired Grand for $500,000. The carrying value of all assets and liabilities were the same as fair value except for
customer relationship of $50,000 which has a 5 year life.

The parent company made the following entry during 2017:

Investment 20,000
Equity income from sub 20,000
note: the sub had income of $30,000 and amortization of the customer relationship of $10,000

The parent sold during 2017 $500,000 of goods to the subsidiary. At December 31, 2017,
there was $80,000 of goods still in inventory.

At December 31, 2017, included in accounts payable of Grand was $120,000 due to Simon.