Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Check my work 2 Peace Corporation acquired 100 percent of Soft Inc. in a nontaxable transaction on December 31, 20X1. The following balance sheet information
Check my work 2 Peace Corporation acquired 100 percent of Soft Inc. in a nontaxable transaction on December 31, 20X1. The following balance sheet information is available immediately following the transaction: 20 points Peace Corporation Book Value Fair Values $ 33,000 $ 33,000 55,000 55,000 77,000 84,000 10,000 83,000 83,000 165,000 200,000 Soft Inc. Book Value Fair values $ 9,000 $ 9,000 20,000 20,000 7,000 10,000 5,000 ? eBook 41,500 23,000 Cash Accounts Receivable, net Inventory Deferred Tax Asset Investment in Soft Equipment, net Patent Total Assets Accounts Payable Accrued Vacation Payable Deferred Tax Liability Long-Term Debt Common Stock Retained Earnings Total Liabilities and Equity 29,000 0 $ 70,000 $13,000 Ask $ 59,000 10,000 $13,000 $ 423,000 $ 59,000 10,000 5,000 110,000 125,000 114,000 $ 423,000 ? 8,000 120,000 References 2,000 8,000 10,000 37,000 $ 70,000 Additional Information 1. The current and future effective tax rate for both Peace and Soft is 40 percent. 2. The recorded deferred tax asset for Peace relates to the book-tax differences arising from the allowance for doubtful Accounts and the Accrued vacation payable. The expenses associated with each of these amounts will not be deductible for tax purposes until the related accounts receivable are written off or until the employee vacation is actually paid out. 3. The recorded deferred tax asset for Soft is related solely to the book-tax difference arising from the allowance for doubtful accounts. 4. The recorded deferred tax liability in both Peace and Soft relates solely to the book-tax differences arising from the depreciation of their respective equipment 5. Accumulated depreciation on the financial accounting records of Peace and Soft is $46,000 and $18,000, respectively. 6. The Soft patent was identified by Peace in the due diligence process and has not previously been recorded in the accounting records of Soft. 7. The book and tax bases of all other assets and liabilities of Peace and Soft are the same. Required: a. Compute the tax bases of the assets and liabilities for Peace and Soft, where different from the amounts recorded in the respective accounting records
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