Company A has just acquired Company B at a discount to book value and wants to prepare
Question:
Company A has just acquired Company B at a discount to book value and wants to prepare a consolidated balance sheet date to the acquisition date. The pre-acquisition balance sheet for both firms are below:
Balance Sheet Company A Company B
Cash 20,000 40,000
Accounts Receivable 30,000 25,000
Inventory 60,000 60,000
Investment in Company B 300,000
Land 250,000 300,000
Buildings and equipment 700,000 220,000
Accumulated depreciation (450,000) (170,000)
Total Assets 1,110,000 745,000
Accounts Payable 60,000 50,000
Debt Outstanding 300,000 300,000
Common Stock 500,000 170,000
Retained Earnings 250,000 225,000
Assume that the 300,000 acquisition of Company B is due to impairment to the goodwill value of Company B and a 50,000 overvaluation of the land on Company B’s balance sheet.
What will the new goodwill and land account totals be under the consolidated balance sheet?
Modern Advanced Accounting in Canada
ISBN: 978-1259087554
8th edition
Authors: Hilton Murray, Herauf Darrell