Question
1. ( 5 POINTS) Parchesi, Inc. will acquire the net assets of Scrabble, Inc. for cash. Parchesi, which has a 30% marginal tax rate, will
1. (5 POINTS) Parchesi, Inc. will acquire the net assets of Scrabble, Inc. for cash. Parchesi, which has a 30% marginal tax rate, will incur $25,000 of direct acquisition costs. Scrabbles balance sheet follows:
Assets
Accounts Receivable $ 30,000
Inventory 90,000
Equipment $ 80,000
Accumulated Depreciation (50,000) 30,000
Land 50,000
Buildings $ 300,000
Accumulated Depreciation (100,000) 200,000
Total Assets $ 400,000
Liabilities and Stockholders Equity
Bonds Payable $ 80,000
Common Stock, $1 Par 160,000
Paid-in-capital in excess of par 80,000
Retained Earnings 80,000
Total Liabilities and Stockholders Equity $ 400,000
Parchesi has secured appraisals indicating the following market values of Scrabbles accounts:
Accounts Receivable $ 30,000
Inventory 95,000
Equipment 40,000
Land 50,000
Buildings 250,000
Bonds Payable 75,000
Parchesi reports financial results on a calendar year basis. Ignore any tax effects.
A) Assume Parchesi paid $400,000 on 12/31/21 for Scrabbles net assets on the next page record the entry for the purchase and provide supporting calculations for your account entries where needed.
B) What if the purchase date was 1/2/08 how does your answer change?
C) Assume Parchesi paid $300,000 on 12/31/21 for Scrabbles net assets on the next page record the entry for the purchase and provide supporting calculations for your account entries where needed.
D) What if the purchase date was 1/2/08 how does your answer change?
1. (5 POINTS) Parchesi, Inc. will acquire the net assets of Scrabble, Inc. for cash. Parchesi, which has a 30% marginal tax rate, will incur $25,000 of direct acquisition costs. Scrabble's balance sheet follows: Liabilities and Stockholders' Equity Parchesi has secured appraisals indicating the following market values of Scrabble's accounts: Parchesi reports financial results on a calendar year basis. Ignore any tax effects. a. Assume Parchesi paid $400,000 on 12/31/21 for Scrabble's net assets - on the next page record the entry for the purchase and provide supporting calculations for your account entries where needed. b. What if the purchase date was 1/2/08 - how does your answer change? c. Assume Parchesi paid $300,000 on 12/31/21 for Scrabble's net assets - on the next page record the entry for the purchase and provide supporting calculations for your account entries where needed. d. What if the purchase date was 1/2/08 - how does your answer changeStep by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started