2) PR Company pays $15,000 in cash and issues no-par stock with a fair vaue of $!5,000 to ac"uire a of # Corporation%s net assets& #%s 'aance sheet at the date of ac"uisition is as foows( SX Corporation
Current assets Property, pant + e"uipment, net dentifia'e intan.i'e assets /ota assets Current ia'iities on.-term de't Capita stock Retained earnin.s ccumuated other comprehensive income /reasury stock /ota /o ta ia'iities + e"uity e" uity
Book value $ ,000 11,000 ,000
Fair value $ *,200 ,000
1*,000
$1,000 $ 2 ,* 0 0 1,000 !,000 ,000 31,000) 34,*00)
$ ,000 12,*00
$1,000
PR%s consutants find these items that are not reported on #%s 'aance sheet(
Potentia contracts with new customers dvanced production technoo.y uture cost savin.s Customer ists
Fair value $ ,500 !,500 2,500 1,500
6utside consutants are paid $00 in cash, and re.istration fees to issue PR%s new stock are $500& /he "uestion 'eow reates to the entry en try or entries PR makes to record the ac"uisition ac "uisition on its 'ooks& PR credits capita stock in the amount of $!5,000 $*0,000 $!!,500
$!!,000
) PR Company pays $15,000 in cash and issues no-par stock with a fair vaue of $!5,000 to ac"uire a of # Corporation%s net assets& #%s 'aance sheet at the date of ac"uisition is as foows( SX Corporation
Current assets Property, pant + e"uipment, net dentifia'e intan.i'e assets /ota assets Current ia'iities on.-term de't Capita stock Retained earnin.s ccumuated other comprehensive income /reasury stock /ota ia'iities + e"uity
Book value $ ,000 11,000 ,000
Fair value $ *,200 ,000
1*,000
$1,000 $ 2,*00 1,000 !,000 ,000 31,000) 34,*00)
$ ,000 12,*00
$1,000
PR%s consutants find these items that are not reported on #%s 'aance sheet(
Potentia contracts with new customers dvanced production technoo.y uture cost savin.s Customer ists
Fair value $ ,500 !,500 2,500 1,500
6utside consutants are paid $00 in cash, and re.istration fees to issue PR%s new stock are $500& /he "uestion 'eow reates to the entry or entries PR makes to record the ac"uisition on its 'ooks& PR records e7penses of $0 $00 $500 $00
!) PR Company pays $15,000 in cash and issues no-par stock with a fair vaue of $!5,000 to ac"uire a of # Corporation%s net assets& #%s 'aance sheet at the date of ac"uisition is as foows( SX Corporation
Current assets Property, pant + e"uipment, net dentifia'e intan.i'e assets /ota assets Current ia'iities on.-term de't Capita stock Retained earnin.s ccumuated other comprehensive income /reasury stock /ota ia'iities + e"uity
Book value $ ,000 11,000 ,000
Fair value $ *,200 ,000
1*,000
$1,000 $ 2,*00 1,000 !,000 ,000 31,000) 34,*00)
$ ,000 12,*00
$1,000
PR%s consutants find these items that are not reported on #%s 'aance sheet(
Potentia contracts with new customers dvanced production technoo.y uture cost savin.s Customer ists
Fair value $ ,500 !,500 2,500 1,500
6utside consutants are paid $00 in cash, and re.istration fees to issue PR%s new stock are $500& /he "uestion 'eow reates to the entry or entries PR makes to record the ac"uisition on its 'ooks& /hree months after the ac"uisition, a fire dama.es #%s e"uipment, reducin. its fair vaue from $,000 to $!,500& 8ow does PR report this event9 oss of $,500, reported on the income statement $,500 increase in .oodwi $,500 decrease in .oodwi :ot reported
5) PR Company pays $15,000 in cash and issues no-par stock with a fair vaue of $!5,000 to ac"uire a of # Corporation%s net assets& #%s 'aance sheet at the date of ac"uisition is as foows( SX Corporation
Current assets Property, pant + e"uipment, net dentifia'e intan.i'e assets /ota assets Current ia'iities on.-term de't Capita stock Retained earnin.s ccumuated other comprehensive income /reasury stock /ota ia'iities + e"uity
Book value $ ,000 11,000 ,000
Fair value $ *,200 ,000
1*,000
$1,000 $ 2,*00 1,000 !,000 ,000 31,000) 34,*00)
$ ,000 12,*00
$1,000
PR%s consutants find these items that are not reported on #%s 'aance sheet(
Potentia contracts with new customers dvanced production technoo.y uture cost savin.s Customer ists
Fair value $ ,500 !,500 2,500 1,500
6utside consutants are paid $00 in cash, and re.istration fees to issue PR%s new stock are $500& /he "uestion 'eow reates to the entry or entries PR makes to record the ac"uisition on its 'ooks& /hree months after the ac"uisition, PR receives information reveain. that the identifi'e intan.i'e assets reported on #%s 'ooks at the date of ac"uisition were reay worth $1,500 instead of $1*,000& 8ow does PR report this information9 oss of $2,500, reported on the income statement
$2,500 decrease in .oodwi $2,500 increase in .oodwi
:ot reported
*) PR Company pays $15,000 in cash and issues no-par stock with a fair vaue of $!5,000 to ac"uire a of # Corporation%s net assets& #%s 'aance sheet at the date of ac"uisition is as foows(
SX Corporation
Current assets Property, pant + e"uipment, net dentifia'e intan.i'e assets /ota assets Current ia'iities on.-term de't Capita stock Retained earnin.s ccumuated other comprehensive income /reasury stock /ota ia'iities + e"uity
Book value $ ,000 11,000 ,000
Fair value $ *,200 ,000
1*,000
$1,000 $ 2,*00 1,000 !,000 ,000 31,000) 34,*00)
$ ,000 12,*00
$1,000
PR%s consutants find these items that are not reported on #%s 'aance sheet(
Potentia contracts with new customers dvanced production technoo.y uture cost savin.s Customer ists
Fair value $ ,500 !,500 2,500 1,500
6utside consutants are paid $00 in cash, and re.istration fees to issue PR%s new stock are $500& /he "uestion 'eow reates to the entry or entries PR makes to record the ac"uisition on its 'ooks& :ow assume the ac"uisition cost to PR is $40,000 3not the ri.ht )& 6ther facts are the same as ori.inay reported& ;oodwi reported on this ac"uisition is $5,*00 $5,00 $*4,!00 $5,!00
) PR Company pays $15,000 in cash and issues no-par stock with a fair vaue of $!5,000 to ac"uire a of # Corporation%s net assets& #%s 'aance sheet at the date of ac"uisition is as foows( SX Corporation
Current assets Property, pant + e"uipment, net dentifia'e intan.i'e assets /ota assets Current ia'iities on.-term de't Capita stock Retained earnin.s ccumuated other comprehensive income /reasury stock /ota ia'iities + e"uity
Book value $ ,000 11,000 ,000
Fair value $ *,200 ,000
1*,000
$1,000 $ 2,*00 1,000 !,000 ,000 31,000) 34,*00)
$ ,000 12,*00
$1,000
PR%s consutants find these items that are not reported on #%s 'aance sheet(
Potentia contracts with new customers dvanced production technoo.y uture cost savin.s Customer ists
Fair value $ ,500 !,500 2,500 1,500
6utside consutants are paid $00 in cash, and re.istration fees to issue PR%s new stock are $500& /he "uestion 'eow reates to the entry or entries PR makes to record the ac"uisition on its 'ooks& :ow assume PR paid $4,500 in cash for #%s net assets& /here are no consutant fees, and no shares are issued& ssume that #%s previousy unrecorded intan.i'e assets, capitai
) =hich one of the foowin. is most ikey to 'e reported as part of .oodwi9
>rand names >roadcast ri.hts :on-competition a.reements avora'e ocation
4) =hat is the current standard for reportin. ac"uired in-process R+?9 :ot reported@ 'ecomes part of .oodwi Capitai
10) =hich of the foowin. items reated to an ac"uired company is most ikey to 'e recorded 'y the ac"uirer9 =arranty ia'iity Pendin. awsuit, where the ac"uired company is the defendant Pendin. awsuit, where the ac"uired company is the paintiff ines that mi.ht 'e assessed 'y environmenta a.encies
11) Recording a Merger and a Stock Acquisition /he Poonamaie Company paid $!,000,000 in cash to the sharehoders of the #ys company for a of #ys% outstandin. shares& ttorneys% fees reated to the com'ination were $15,000 paid in cash& comparison of the 'ook and fair vaues of #ys% assets and ia'iities foows(
Cash and receiva'es B"uity method investments nventory Pant assets Current ia'iities on.-term de't :et assets
Book Value $120,000 15,000 *10,000 1,*00,000 3!0,000) 31,040,000)
Fair Value $120,000 200,000 !00,000 1,000,000 3!0,000) 31,100,000)
$1,05,000
$20,000
