Assume that on January 1, 2013, the investor company issued 4,000 new shares of the investor...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Assume that on January 1, 2013, the investor company issued 4,000 new shares of the investor company's common stock in exchange for all of the individually identifiable assets and liabilities of the investee company. The investee company qualifies as a business. Fair value approximates book value for all of the investee's identifiable net assets. The transaction resulted in no goodwill or bargain purchase gain. The following financial statement information is for an investor company and an investee company on January 1, 2013, prepared immediately before this transaction. Book Values Investor investee Receivables & inventories $80,000 $40,000 160,000 80,000 180,000 80,000 $420,000 $200,000 $120,000 $64,000 16,000 8,000 224,000 120,000 60,000 8,000 $420,000 $200,000 $300,000 $136,000 Land Property & equipment Total assets Liabilities Common stock ($1 par) Additional paid-in capital Retained earnings Total liabilities & equity Net assets Provide the investor company's balance (i.e., on the investor's books, before consolidation) for an "Investment in Investee" account immediately following the acquisition of the investee's net assets: Assume that on January 1, 2013, an investor company acquired 100% of the outstanding voting common stock of an investee company in exchange for $150,000. The transaction is a taxable asset acquisition under the Internal Revenue Code. The following financial statement information is for the investor company and the investee company on January 1, 2013, prepared immediately before this transaction. Book Values Investor Investee $150,000 $80,000 Current assets Noncurrent assets 225,000 100,000 Total assets $375,000 $180,000 Liabilities $150,000 $80,000 Common stock ($1 par) 20,000 10,000 Additional paid-in capital 130,000 80,000 Retained earnings 75,000 10,000 Total liabilities & equity $375,000 $180,000 Assume that the fair values of the investee's net assets approximated the recorded book values of the investee's net assets, except the fair value of the investee's identifiable noncurrent assets is $20,000 higher than book value. In addition, the investee's pre-transaction tax bases in its individual net assets approximate their reported book values. This difference relates entirely to tax-deductible items. Assume the marginal tax rate is 40% for the investor and investee. What amount of goodwill should be reported in the investor's consolidated balance sheet prepared immediately after this business combination? Assume that on January 1, 2013, the investor company issued 4,000 new shares of the investor company's common stock in exchange for all of the individually identifiable assets and liabilities of the investee company. The investee company qualifies as a business. Fair value approximates book value for all of the investee's identifiable net assets. The transaction resulted in no goodwill or bargain purchase gain. The following financial statement information is for an investor company and an investee company on January 1, 2013, prepared immediately before this transaction. Book Values Investor investee Receivables & inventories $80,000 $40,000 160,000 80,000 180,000 80,000 $420,000 $200,000 $120,000 $64,000 16,000 8,000 224,000 120,000 60,000 8,000 $420,000 $200,000 $300,000 $136,000 Land Property & equipment Total assets Liabilities Common stock ($1 par) Additional paid-in capital Retained earnings Total liabilities & equity Net assets Provide the investor company's balance (i.e., on the investor's books, before consolidation) for an "Investment in Investee" account immediately following the acquisition of the investee's net assets: Assume that on January 1, 2013, an investor company acquired 100% of the outstanding voting common stock of an investee company in exchange for $150,000. The transaction is a taxable asset acquisition under the Internal Revenue Code. The following financial statement information is for the investor company and the investee company on January 1, 2013, prepared immediately before this transaction. Book Values Investor Investee $150,000 $80,000 Current assets Noncurrent assets 225,000 100,000 Total assets $375,000 $180,000 Liabilities $150,000 $80,000 Common stock ($1 par) 20,000 10,000 Additional paid-in capital 130,000 80,000 Retained earnings 75,000 10,000 Total liabilities & equity $375,000 $180,000 Assume that the fair values of the investee's net assets approximated the recorded book values of the investee's net assets, except the fair value of the investee's identifiable noncurrent assets is $20,000 higher than book value. In addition, the investee's pre-transaction tax bases in its individual net assets approximate their reported book values. This difference relates entirely to tax-deductible items. Assume the marginal tax rate is 40% for the investor and investee. What amount of goodwill should be reported in the investor's consolidated balance sheet prepared immediately after this business combination?
Expert Answer:
Answer rating: 100% (QA)
To solve this problem we need to combine the financial information given for both investor and investee companies and make the required adjustments after the business combination However it seems you ... View the full answer
Related Book For
Financial Reporting and Analysis
ISBN: 978-0078025679
6th edition
Authors: Flawrence Revsine, Daniel Collins, Bruce, Mittelstaedt, Leon
Posted Date:
Students also viewed these accounting questions
-
The following financial statement information is for an investor company and an investee company on January 1, 2019. On January 1, 2019, the investor company's common stock had a traded market value...
-
Assume that on January 1, 2016 an investor company paid $11,600 to an investee company in exchange for the following assets and liabilities transferred from the investee company: Investee's Estimated...
-
A company has the following data to prepare the budgets for 2023: Budgeted Sales units: 1 st Qtr 5,000; 2 nd Qtr 5,500; 3 rd Qtr 6,000 Desired Ending Finished Goods Inventory: 20% of next Qtr Sales...
-
A marketing researcher wants to estimate the mean amount spent per year ($) on a web site by membership member shoppers. Suppose a random sample of 150 membership member shoppers who recently made a...
-
Are liquidations likely to be more common for public utility, railroad, or industrial corporations? Why?
-
List some formulas that occur in applications. Solve the formula for the indicated variable. Chemistry PV = nRT for T
-
What is a conglomerate discount? How can it be avoided?
-
Use the data in Problem P11-48A to prepare the Crowley Cosmetics statement of retained earnings for the year ended December 31, 2012. Use the Statement of Retained Earnings for Maxim, Inc., in the...
-
Often, frequency distributions are reported using unequal class widths because the frequencies of some groups would otherwise be small or very large. Consider the following data, which represent the...
-
Database includes 2 years worth of actual data and one year of budget data for a retail business with 2 locations. In 2017, there was just one location, North. In January 2018, a new location, South,...
-
Find the data here Y X 21 3.897 14 3.885 28 3.778 22 2.54 21 3.028 31 3.865 32 2.962 27 3.961 29 0.5 26 3.178 24 3.31 30 3.538 24 3.083 24 3.013 33 3.245 27 2.963 25 3.522 31 3.013 25 2.947 20 2.118...
-
Marvel Parts Inc. manufactures auto accessories. One of the company's products is a set of seat covers that can be adjusted to fit nearly any small car. The company has a standard cost system in use...
-
The internal rate of return from an investment in new equipment is expected to be 8.9% p.a. If the returns are expected to be $53795 at the end of the first year, -$3439 at the end of the second year...
-
In terms of share investment define what beta () represents.[2.5 marks] According to au.finance.yahoo.com, APT has a beta of 1.88.What does this mean?[2.5 marks] In terms of riskiness how would you...
-
(i) Under a perfectly competitive scenario q=10+5L and P=6, where q level of output, P price and L-labour employed. Find the equilibrium wage. (ii) The magnitude of economic rent depends on the...
-
Dawn Manufacturing applies manufacturing overhead at a rate of $40 per direct labor hour. b. Describe briefly how this rate was computed. The company estimated total this amount by the direct for the...
-
On December 31, 2020 new partner D invests other assets into the partnership for a one-quarter ownership interest. An equal amount of capital is contributed by A, B, and C to make up the difference....
-
The landing gear of an aircraft with: mass of 2000 kg the spring-mass-damper system Consider that the runway surface is y(t) = 0.2 cos 157.08t stiffness of the spring is 5 x 105 N/m. What is the...
-
Samson Manufacturing Company, a calendar year company, purchased a machine for $65,000 on January 1, 2012. At the date of purchase, Samson incurred the following additional costs: Loss on sale of old...
-
On January 2, 2014, Yardley Company sold a plant to Ivory Inc. for $1,500,000. On that date, the plants carrying cost was $1,000,000. Ivory gave Yardley $300,000 cash and a $1,200,000 note, payable...
-
Baer Enterprisess balance sheet at October 31, 2014 (fiscal year-end) includes the following: Accounts receivable $379,000 Less: Allowance for uncollectible accounts (33,000) Accounts receivable...
-
A fleet of refrigerated delivery trucks is acquired on January 5, 2005, at a cost of $930,000 with an estimated useful life of eight years and an estimated salvage value of $150,000. Compute the...
-
Corazon Company acquires an ore mine at a cost of $1,300,000. It incurs additional costs of $200,000 to access the mine, which is estimated to hold 500,000 tons of ore. The estimated value of the...
-
Bowl-4-Fun installs automatic scorekeeping equipment with an invoice cost of $180,000. The elec trical work required for the installation costs $18,000. Additional costs are $3,000 for delivery and...
Study smarter with the SolutionInn App