Let's break down the problem and solve each part step by step. ### **Given Data:** #### **Balance Sheets (Jan 1)** | Items | Park | Strand | |-------------------|-----------|----------| | Current Assets | $101,000 | $35,200 | | Noncurrent Assets | $106,500 | $41,300 | | **Total Assets** | $207,500 | $76,500 | | Current Liabilities | $49,000 | $26,500 | | Long-term Debt | $63,500 | $0 | | Stockholders' Equity | $95,000| $50,000 | | **Total Liabilities & Equity** | $207,500 | $76,500 | - Park borrows $63,200 and uses it to buy 80% of Strand. - Acquisition price is proportional to Strand’s total fair value. - $63,200 debt is new for Park. - Excess fair value over book value is allocated: 60% inventory, 40% goodwill. --- ## **Step 1: Purchase Price and Implied Value** - Park paid $63,200 for 80%. - Implied 100% value of Strand = $63,200 / 0.8 = **$79,000** --- ## **Step 2: Book Value of Net Assets (Strand)** - Net assets = Total assets - Total liabilities = $76,500 - $26,500 = **$50,000** --- ## **Step 3: Excess Fair Value Over Book Value** - Excess (100%): $79,000 (fair value) - $50,000 (book value) = **$29,000** - Inventory: 60% × $29,000 = **$17,400** - Goodwill: 40% × $29,000 = **$11,600** --- ## **Step 4: Consolidated Balance Sheet (as of Jan 2)** ### **a. Current Assets** - Park: $101,000 - Strand: $35,200 - Add excess allocated to inventory: $17,400 - **Total:** $101,000 + $35,200 + $17,400 = **$153,600** ### **b. Noncurrent Assets** - Park: $106,500 - Strand: $41,300 - Add goodwill: $11,600 - **Total:** $106,500 + $41,300 + $11,600 = **$159,400** ### **c. Current Liabilities** - Park: $49,000 - Strand: $26,500 - **Total:** $49,000 + $26,500 = **$75,500** ### **d. Noncurrent Liabilities** - Park: $63,500 - Add new debt for acquisition: $63,200 - **Total:** $63,500 + $63,200 = **$126,700** ### **e. Stockholders' Equity** - Consolidated equity is parent's only: **$95,000** --- ## **Final Answers:** a. Current assets: **$153,600** b. Noncurrent assets: **$159,400** c. Current liabilities: **$75,500** d. Noncurrent liabilities: **$126,700** e. Stockholders' equity: **$95,000** --- **Note:** - NCI (Noncontrolling interest) will also appear in the consolidated balance sheet, but the question only asks for the amounts above. - Stockholders' equity is parent's only in consolidation. --- Let me know if you need a detailed calculation for NCI or further clarification!

Certainly! Let's go through each step carefully with detailed explanations to understand how the consolidated balance sheet as of January 2 is calculated. --- ### **Step 1: Understand the Data and the Context** - **Balance sheets (Jan 1):** - **Park Corporation:** - Current assets: $101,000 - Noncurrent assets: $106,500 - Total assets: $207,500 - Current liabilities: $49,000 - Long-term debt: $63,500 - Stockholders' equity: $95,000 - **Strand Corporation:** - Current assets: $35,200 - Noncurrent assets: $41,300 - Total assets: $76,500 - Current liabilities: $26,500 - Long-term debt: $0 - Stockholders' equity: $50,000 - **Transaction details:** - **On Jan 2**, Park borrows **$63,200** and uses it to acquire **80%** of Strand. - The purchase price is based on the proportionate fair value of Strand. - The **$63,200** debt is payable in 10 equal annual installments, starting December 31. - The **excess fair value** over book value of Strand's net assets is allocated as: - **60%** to inventory - **40%** to goodwill --- ### **Step 2: Find the Implied Total Fair Value of Strand** Park paid **$63,200** for **80%** ownership. - To find the **total fair value** of Strand (100%), divide the amount paid by 80%: \[ \text{Implied value} = \frac{\$63,200}{0.8} = \$79,000 \] --- ### **Step 3: Determine the Book Value of Strand's Net Assets** - **Book value of net assets** = Total assets - Total liabilities \[ \text{Net assets} = \$76,500 - \$26,500 = \$50,000 \] --- ### **Step 4: Calculate the Excess Fair Value over Book Value** - The **excess fair value**: \[ \text{Excess} = \text{Fair value} - \text{Book value} = \$79,000 - \$50,000 = \$29,000 \] - This excess is allocated between inventory and goodwill: \[ \text{Inventory} = 60\% \times \$29,000 = \$17,400 \] \[ \text{Goodwill} = 40\% \times \$29,000 = \$11,600 \] --- ### **Step 5: Prepare the Consolidated Balance Sheet as of Jan 2** Now, combine the assets and liabilities, adjusting for the acquisition. --- #### **a. Current Assets** - **Park's current assets:** $101,000 - **Strand's current assets:** $35,200 - **Add excess allocated to inventory:** $17,400 \[ \text{Total current assets} = 101,000 + 35,200 + 17,400 = \boxed{\$153,600} \] --- #### **b. Noncurrent Assets** - **Park's noncurrent assets:** $106,500 - **Strand's noncurrent assets:** $41,300 - **Add goodwill:** $11,600 \[ \text{Total noncurrent assets} = 106,500 + 41,300 + 11,600 = \boxed{\$159,400} \] --- #### **c. Current Liabilities** - **Park's current liabilities:** $49,000 - **Strand's current liabilities:** $26,500 \[ \text{Total current liabilities} = 49,000 + 26,500 = \boxed{\$75,500} \] --- #### **d. Noncurrent Liabilities** - **Park's existing long-term debt:** $63,500 - **Additional debt from acquisition:** $63,200 Total noncurrent liabilities: \[ 63,500 + 63,200 = \boxed{\$126,700} \] --- #### **e. Stockholders’ Equity** - **Parent’s (Park’s) equity:** $95,000 In a consolidation, the parent’s equity remains unchanged, but the new debt and investment affect the overall balance sheet. --- ### **Final Consolidated Balance Sheet (as of Jan 2):** | **Assets** | **Amount** | |------------------------------|--------------| | **Current assets** | **$153,600** | | **Noncurrent assets** | **$159,400** | | **Liabilities and Equity** | **Amount** | |------------------------------|--------------| | **Current liabilities** | **$75,500** | | **Noncurrent liabilities** | **$126,700** | | **Stockholders’ equity** | **$95,000** | --- ### **Summary of Key Points:** - The **total assets** increase by the fair value adjustments (inventory + goodwill). - The **liabilities** increase with the new debt used for acquisition. - The **equity** reflects the parent's original equity. --- ### **Note on Noncontrolling Interest (NCI):** - The problem does not explicitly ask for NCI, but in detailed consolidation, NCI would be calculated as 20% of the fair value of Strand and recorded separately. --- **If you need further breakdowns or explanations, feel free to ask!**