Question
Consolidated Balance Sheet Working Paper, Identifiable Intangibles International Auto (IA) acquires all of the stock of Genuine Parts (GP) and reports the acquisition as a
Consolidated Balance Sheet Working Paper, Identifiable Intangibles | |||||||
International Auto (IA) acquires all of the stock of Genuine Parts (GP) and reports the acquisition as a stock investment on its own books. The acquisition involves the following payments. All amounts are in thousands. | |||||||
Cash paid to GP shareholders | $5,000 | ||||||
Cash paid to consultants and lawyers | 1,200 | ||||||
Fair value of new IA stock issued, 1,000 shares, $2 par | 36,000 | ||||||
Stock registration fees, paid in cash | 900 | ||||||
Fair value of earnings contingency | 250 | ||||||
The earnings contingency, if paid, will occur three years subsequent to the acquisition. The balance sheet accounts of GP and IA, just prior to the acquisition, are as follows: | |||||||
International Auto | Genuine Parts | ||||||
(in thousands) | Book Value Dr (Cr) | Book Value Dr (Cr) | Fair Value Dr (Cr) | ||||
Current assets | $30,000 | $1,000 | $1,200 | ||||
Fixed assets, net | 420,000 | 27,000 | 20,000 | ||||
Trademarks | 89,000 | 3,400 | 6,000 | ||||
Current liabilities | -25,000 | -400 | -400 | ||||
Long-term liabilities | -350,000 | -26,000 | -25,000 | ||||
Common stock, par value | -8,000 | -500 | |||||
Additional paid-in capital | -110,000 | -8,500 | |||||
Retained earnings | -45,000 | 2,000 | |||||
Accumulated other comprehensive income | -4,000 | 1,400 | |||||
Treasury stock | 3,000 | 600 | |||||
Total | $0 | $0 | |||||
In addition to the assets reported on GPs balance sheet, the following previously unreported intangible assets are identified. Note: Some of these intangibles may not be separately capitalized per ASC Topic 805. | |||||||
(in thousands) | Fair value | ||||||
Licensing agreements | $2,400 | ||||||
Skilled workforce | 15,000 | ||||||
Order backlogs | 5,000 | ||||||
Future synergies between IA and GP supply chains | 1,600 | ||||||
a. Prepare a schedule calculating the excess of acquisition cost over GPs book value, and its allocation to GPs identifiable net assets and goodwill. | |||||||
When appropriate, use negative signs with your excess of fair value over book value answers (left column only). | |||||||
Do not use negative signs with answers in the right column. | |||||||
Enter answers in thousands. | |||||||
Acquisition cost | 0 | ||||||
GP book value | 0 | ||||||
Excess of acquisition cost over book value | 0 | ||||||
Excess of fair value over book value: | |||||||
Current assets | 0 | ||||||
Fixed assets, net | 0 | ||||||
Trademarks | 0 | ||||||
????? | 0 | ||||||
????? | 0 | ||||||
Long-term liabilities | 0 | 0 | |||||
Goodwill | 0 | ||||||
b. Prepare a working paper to consolidate the balance sheets of IA and GP at the date of acquisition. | |||||||
Use negative signs with your credit balance answers in the Dr (Cr) columns. | |||||||
Enter answers in thousands. | |||||||
Consolidation Working Paper | |||||||
Accounts Taken From Books | Eliminations | ||||||
(in thousands) | International Auto Dr (Cr) | Genuine Parts Dr (Cr) | Debit | Credit | Consolidated Balances Dr (Cr) | ||
Current assets | (R) | ||||||
Fixed assets, net | (R) | ||||||
Investment in GP | (E) | ||||||
(R) | |||||||
Trademarks | (R) | ||||||
(R) | |||||||
(R) | |||||||
Goodwill | (R) | ||||||
Current liabilities | |||||||
Long-term liabilities | (R) | ||||||
Common stock, par | (E) | ||||||
Additional paid-in capital | (E) | ||||||
Retained earnings | (E) | ||||||
AOCI | (E) | ||||||
Treasury stock | (E) | ||||||
Total | |||||||
c. Prepare the consolidated balance sheet at the date of acquisition, in good form. | |||||||
Do not use negative signs with any of your answers below. | |||||||
Enter answers in thousands. | |||||||
International Auto and Subsidiary Consolidated Balance Sheet Date of Acquisition | |||||||
Assets | Liabilities | ||||||
Current assets | Current liabilities | ||||||
Fixed assets, net | Long-term liabilities | ||||||
Trademarks | Total liabilities | ||||||
Other identifiable intangible assets | |||||||
Goodwill | Shareholders' Equity | ||||||
Common stock, par | |||||||
Additional paid-in capital | |||||||
Retained earnings | |||||||
Accumulated other comprehensive income | |||||||
Treasury stock | |||||||
Total shareholders equity | |||||||
Total assets | Total liabilities and equity |
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