Question
CHAPTER 2 Use the following information to answer questions #1-5. All amounts are in thousands. PR Company pays $10,000 in cash and issues no par
CHAPTER 2
Use the following information to answer questions #1-5. All amounts are in thousands. PR Company pays $10,000 in cash and issues no par stock with a fair value of $40,000, to acquire all of SX Corporation's net assets. SX's balance sheet at the date of the acquisition is as follows:
SX Corporation
Book Value Fair Value
Current Assets $2,000 $4,200
Property, Plant and Equipment $10,000 $6,000
Identifiable Intangible Assets $4,000 $14,000
Total Assets: $16,000
Current Liabilities $1,600 $2,000
Long-Term Debt $12,000 $11,600
Capital Stock $5,000
Retained Earnings $8,000
Accumulated Other Comprehensive Income ($1,000)
Treasury Stock ($9,600)
Total Liabilities and Equity: $16,000
PR's consultants find these items that are not reported on SX's balance sheet
Fair Value
Potential contracts with new customers $8,000
Advanced production technology $4,000
Future cost savings 2,000
Customer list $1,000
Outside consultants are paid $200 in cash, and registration fees to issue PR's new stock are $400. All questions below relate to the entry or entries PR makes to record the acquisition on its books.
- PR recognizes previously unrecorded intangibles of:
- $1,000 b. $5,000 c. $13,000 d. $15,000
- PR credits Capital Stock in the amount of?
- $40,000 b. $50,000 c. $39,600 d. $39,200
- PR records expenses of:
- $0 b. $200 c. $400 d. $600
- Three months after the acquisition, a fire damages SX's equipment, reducing its fair value from $6,000 to $4,000. How does PR report this event? Ignore depreciation.
- Loss of $2,000, reported on the income statement
- $2,000 increase in goodwill
- $2,000 decrease in goodwill
- Not reported
- Three months after the acquisition, PR receives information revealing that the identifiable intangible assets reported on SX's books at the date of acquisition were really worth $12,000 instead of $14,000. How does PR report this information? Ignore depreciation.
- Loss of $2,000, reported on the income statement
- $2,000 decrease in goodwill
- $2,000 increase in goodwill
- Not reported
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Fundamental Financial Accounting Concepts
Authors: Thomas Edmonds
7th Edition
73527122, 978-0073527123
