Albany Publishing Company acquired all the common shares of San Diego Book Company for $92 milion cash at the start of the year. Immediately before the business combination, each company had the following condensed balance sheet accounts (in millions): (Click the icon to view the condensed balance sheet accounts. ) Assume that the fair values of San Diego's individual assets and liabilities were equal to their book values. Read the Requirement 1. Prepare a tabulation of the consolidated balance sheet accounts immediately after the acquisition. Use the balance-sheet-equation format. (Enter amounts in millions. Use a minus sign or parentheses for decreases and leave any unused cells blank. For the Consolidated, January 1 balance line only, enter a "O for any zero-balance accounts.) Assets Liabilities and Stockholders' Equity Investment in Cash and Stockholders In milions San Diego Goodwill other assets payable, etc.+ equity Albany's accounts, January 1 Before acquisition Acquisition of San Diego San Diego's accounts, January 1 Totals before eliminating entries Intercompany e Consolidated, January 1 Requirement 2. Suppose the book values of San Diego's individual assets are equal to their fair-market values except for equipment. The net book value of equipment is $35 million and its fair-market value is $43 million. The equipment has a remaining useful life of 4 years. Straight-line depreciation is used. a. Complete the table below to show how the consolidated balance sheet accounts immediately after the acquisition would differ from those in number 1. (If an account is unchanged by the difference in the market value and book value of San Diego's equipment, select "not be affected" in the first column, and then leave the amount column, the second column, blank.) The consolidated: In milions Investment in San Diego would Goodwill would Cash and other assets would (1) payable, etc. would 4) 5) Stockholders' equity would b. By how much will consolidated income differ in comparison with the consolidated income that would be reported when the entire excess of purchase cost over book value of net assets was assigned to goodwill? Assume no impairment of goodwill. when the entire excess of purchase cost over book value of net assets Consolidated income would be $ was assigned to goodwill. million (6) 1: Data Table Albany San Diego 920$ 120 40 80 120 assetsS Accounts payable, eto. S130s Stockholders' equity Total equities 790 S 920 2: Requirements 1. Prepare a tabulation of the consolidated balance sheet accounts immediately after the acquisition. Use the balance-sheet-equation format. 2. Suppose the book values of San Diego's individual assets are equal to their fair-market values except for equipment. The net book value of equipment is $35 million and its fair-market value is $43 million. The equipment has a remaining useful life of 4 years. Straight-line depreciation is used. a. Describe how the consolidated balance sheet accounts immediately after the acquisition would differ from those in number 1. Be specific as to accounts and amounts. b. By how much will consolidated income differ in comparison with the consolidated income that would be reported when the entire excess of purchase cost over book value of net assets was assigned to goodwill? Assume no impairment of goodwill. 1) O (2) O (3) O (4) O (5) O O increase by O decrease by O not be affected O increase by O decrease by O not be affected. O increase by O decrease by O not be affected. O increase by O decrease by O not be affected. O increase by O decrease by O not be affected (6) O higher O lower
