Question
Bargain Purchase Xi Corp's net assets have fair values as described below: Fair Value Current assets $350,000 Land $800,000 Buildings and equipment $1,200,000 Loans
Bargain Purchase Xi Corp's net assets have fair values as described below:
Fair Value | |
Current assets | $350,000 |
Land | $800,000 |
Buildings and equipment | $1,200,000 |
Loans payable | $(300,000) |
Omicron Corporation pays $3,300,000 for Xi Corp and records the acquisition as a merger. Omicron Corporation determines that identifiable intangibles valued at $1,800,000, not previously reported on Xi’s books, are also recognized as acquired assets.
Required: a. Prepare a schedule to calculate the gain on acquisition. b. Prepare Omicron’s journal entry to record the merger. c. Now assume Omicron determines that Xi Corp has unreported contingent liabilities, reportable at the date of acquisition following GAAP, with a fair value of $90,000. Recalculate the gain on acquisition.
Step 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