1 DS C. LO] E2.14 Recording Asset Acquisition In 2013, Flowers Foods, Inc. acquired certain assets of Hostess Brands, Inc., including the Wonder and Butternut bread brands and related assets. Flowers incurred $16 million in out-of-pocket acquisition costs for this acquisition, paid in cash. These costs were reported in selling, distribution and administrative expenses. The following table summarizes information found in Flowers 2013 10-K filing, concerning consideration paid and assets acquired (in thousands). Chapter 2 Mergers and Acquisitions Property, plant and equipment. Trademarks .. Financial assets Total identifiable assets acquired. Gain on legal settlement. Goodwill Acquisition cost, paid in cash $160,673 189,000 1,650 351,323 (1,400) 5,419 $355,342 Flowers had filed a trademark infringement suit against Hostess prior to the acquisition. This suit was settled for $1.4 million and reported as a gain on legal settlement. As of the 2013 balance sheet date, Flowers had not yet received payment on this settlement. Required a. Flowers acquired only a subset of Hostess' assets, and none of its liabilities. Since Flowers did not acquire the company as a whole, do the requirements of ASC 805 still apply? Cite appropriate Codification. b. How did Flowers report the lawsuit settlement? Prepare Flowers' summary entry to record its acquisition of Hostess' bread brands and related assets. C. 1 DS C. LO] E2.14 Recording Asset Acquisition In 2013, Flowers Foods, Inc. acquired certain assets of Hostess Brands, Inc., including the Wonder and Butternut bread brands and related assets. Flowers incurred $16 million in out-of-pocket acquisition costs for this acquisition, paid in cash. These costs were reported in selling, distribution and administrative expenses. The following table summarizes information found in Flowers 2013 10-K filing, concerning consideration paid and assets acquired (in thousands). Chapter 2 Mergers and Acquisitions Property, plant and equipment. Trademarks .. Financial assets Total identifiable assets acquired. Gain on legal settlement. Goodwill Acquisition cost, paid in cash $160,673 189,000 1,650 351,323 (1,400) 5,419 $355,342 Flowers had filed a trademark infringement suit against Hostess prior to the acquisition. This suit was settled for $1.4 million and reported as a gain on legal settlement. As of the 2013 balance sheet date, Flowers had not yet received payment on this settlement. Required a. Flowers acquired only a subset of Hostess' assets, and none of its liabilities. Since Flowers did not acquire the company as a whole, do the requirements of ASC 805 still apply? Cite appropriate Codification. b. How did Flowers report the lawsuit settlement? Prepare Flowers' summary entry to record its acquisition of Hostess' bread brands and related assets. C