On February 1, 2022, ABC Limited, a public company, decided to buy most of the net...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
On February 1, 2022, ABC Limited, a public company, decided to buy most of the net assets of XYZ Inc. for $1,200,000 paid for with the issuance of 80,000 of its own shares and a building that is fair valued at $300,000. This building is included in PP&E at a net book value of $200,000. ABC will not be acquiring the cash or the financial assets that XYZ has. In addition, ABC has agreed to pay an additional $200,000 if the patent of XYZ generates more than $1,000,000 in revenues by 2026. It has been determined that the fair value of this contingent consideration is $150,000 at February 1, 2022. ABC incurred $5,000 of fees to pay its lawyers and $3,000 for the underwriters, payable in 30 days. The balances showing on the statement of financial position for the two companies at February 1, 2022, just prior to the acquisition are as follows: Assets Cash Accounts receivable Right of use asset Financial assets PPE-net Liabilities Accounts payable Bonds payable Equity Common shares ($10/ share) Retained earnings ABC S 45,000 65,000 50,000 0 3.590,000 3.750.000 665,000 1,350,000 950,000 785,000 3.750.000 XYZ $ 30,000 25,000 140,000 45,000 820,000 1.060.000 190,000 300,000 250,000 320,000 1.060.000 After a review of the assets and liabilities, ABC determines that some of the assets of XYZ have fair values different from their carrying values. These items are listed below: PP&E - fair value is $1,150,000 Internally Developed Patent - fair value is $200,000 Customer list -fair value is $145,000 Required: 1. Discuss whether a business combination has occurred and determine the acquirer on February 1, 2022. 2. Determine the amount of goodwill that will be recorded on the business combination. On February 1, 2022, ABC Limited, a public company, decided to buy most of the net assets of XYZ Inc. for $1,200,000 paid for with the issuance of 80,000 of its own shares and a building that is fair valued at $300,000. This building is included in PP&E at a net book value of $200,000. ABC will not be acquiring the cash or the financial assets that XYZ has. In addition, ABC has agreed to pay an additional $200,000 if the patent of XYZ generates more than $1,000,000 in revenues by 2026. It has been determined that the fair value of this contingent consideration is $150,000 at February 1, 2022. ABC incurred $5,000 of fees to pay its lawyers and $3,000 for the underwriters, payable in 30 days. The balances showing on the statement of financial position for the two companies at February 1, 2022, just prior to the acquisition are as follows: Assets Cash Accounts receivable Right of use asset Financial assets PPE-net Liabilities Accounts payable Bonds payable Equity Common shares ($10/ share) Retained earnings ABC S 45,000 65,000 50,000 0 3.590,000 3.750.000 665,000 1,350,000 950,000 785,000 3.750.000 XYZ $ 30,000 25,000 140,000 45,000 820,000 1.060.000 190,000 300,000 250,000 320,000 1.060.000 After a review of the assets and liabilities, ABC determines that some of the assets of XYZ have fair values different from their carrying values. These items are listed below: PP&E - fair value is $1,150,000 Internally Developed Patent - fair value is $200,000 Customer list -fair value is $145,000 Required: 1. Discuss whether a business combination has occurred and determine the acquirer on February 1, 2022. 2. Determine the amount of goodwill that will be recorded on the business combination.
Expert Answer:
Answer rating: 100% (QA)
SOLUTION Determining if a Business Combination has Occurred and the Acquirer A business combination has occurred because ABC Limited has acquired most ... View the full answer
Related Book For
Financial Reporting Financial Statement Analysis and Valuation a strategic perspective
ISBN: 978-1337614689
9th edition
Authors: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Posted Date:
Students also viewed these accounting questions
-
MHLV is a public company based in Montreal, Quebec that specializes in luxury consumer products and trades on the Toronto Stock Exchange, with 100 million common shares issued and outstanding. It...
-
Managing Scope Changes Case Study Scope changes on a project can occur regardless of how well the project is planned or executed. Scope changes can be the result of something that was omitted during...
-
The following draft statement of financial positions relate to Largo, a public limited company, Fusion, a public limited company and Spine, a public limited company, as at 30 November 20X3. The...
-
Find the volumes of the solids in Problems 4952 correct to the nearest unit. 4 cm -6 cm 8 cm
-
A solenoid with a length of 20 cm and a radius of 5 cm consists of 400 turns and carries a current of 12 A. If z = 0 represents the midpoint of the solenoid, generate a plot for H (z) as a function...
-
Under what conditions does the net area of a region equal the area of a region? When does the net area of a region differ from the area of a region?
-
Suppose you are opening a health insurance brokerage firm and want to market your services to small businesses with fewer than 50 employees. Determine the information you must pull from your database...
-
Estimating the volume of loans that will be made at a credit union is crucial to effective cash management in those institutions. In the table that follows are quarterly data for a real credit union...
-
Question 16 10 pts Presented below is the trial balance of Your Company as of December 31, 2022. After the closing entries have been recorded, what is the ending balance for retained earnings?...
-
As she headed toward her boss's office, Emily Hamilton, chief operating officer for the Aerocomp Corporation-a computer services firm that specialized in airborne support-wished she could remember...
-
Celso, Lino and Noel are partners with capital balances of P180,000, P100,000 and P120,000 respectively. Joel is admitted into the partnership with a one-fourth interest upon payment of P160,000. If...
-
In a separate document, answer the following questions: Define project. Define the term project objective and give some examples. List some examples of resources that are used on a project.
-
Related to COBIT 2019, APO06 Budget and Cost Management, answer the next questions: 1.What is the relevance of effective and efficient use of I&T related resources; for transparency and...
-
Accounting and Auditing in International Business: Introduction: International business operations are complex, involving a multitude of financial transactions, regulatory frameworks, and cultural...
-
What steps are involved in settling a purchase made in Britain with a credit card issued by a US bank? Why do you think the spread between buying and sell rates used in credit-card payments is...
-
The Platter Valley factory of Bybee Industries manufactures field boots. The cost of each boot includes direct materials, direct labor, and manufacturing (factory) overhead. The firm traces all...
-
We can imagine the financial manager doing several things on behalf of the firm's stockholders. But in well-functioning capital markets, shareholders will vote for only one of these goals. Which one?...
-
The following processes constitute the air-standard Diesel cycle: 12: isentropic compression,23: constant-volume energy addition (T and P increase),34: constant-pressure energy addition (v...
-
On December 31, 2017, Pace Co. paid $3,000,000 to Sanders Corp. shareholders to acquire 100% of the net assets of Sanders Corp. Pace Co. also agreed to pay former Sanders shareholders$200,000 in cash...
-
Abercrombie & Fitch sells casual apparel and personal care products for men, women, and children through retail stores located primarily in shopping malls. Its fiscal year ends January 31 of each...
-
In conceptual terms, explain the value-to-book valuation approach. Explain how the value-to-book approach described and demonstrated in this chapter relates to the residual income valuation approach...
-
Identify organizations in your area that fit each business market category: producer, reseller, government, and institutional. Explain your classifications.
-
Barajas Printing Corp. uses a job order cost system. The following data summa- Prepare entries for manufacrize the operations related to the first quarter's production. turing costs. (SO 2, 3, 4. 5)...
-
Purchases by businesses may be described as new-task, modified rebuy, or straight rebuy. Categorize the following purchase decisions and explain your choices. a. Bob has purchased toothpicks from...
Study smarter with the SolutionInn App