Consolidation with Previously Unrecorded Intangibles and Goodwill

Brightcove, Inc. acquires all of the stock of Ciber, Inc. for $100 million in cash and accounts for the acquisition as a stock acquisition. Balance sheet information at the date of acquisition is as follows (in thousands):

	Brightcove, Inc.	Ciber, Inc.
	Book Value Dr (Cr)	Book Value Dr (Cr)	Fair Value Dr (Cr)
Current assets	$140,000	$800	$600
Plant and equipment, net	400,000	24,000	8,000
Licenses and trademarks	-	10,000	14,000
Investment in Ciber	100,000		-
Current liabilities	(160,000)	(1,600)	(1,600)
Long-term liabilities	(300,000)	(20,000)	(22,000)
Capital stock	(70,000)	(16,000)
Retained earnings	(110,000)	2,800
Total	$0	$0

Brightcove hires a consultant to identify and value any previously unreported intangible assets attributable to Ciber at the date of acquisition. The consultant identifies the following intangibles:

	Fair Value
	(in thousands)
Customer contracts	$2,000
Assembled workforce	40,000
Brand names	10,000
Leases at rents below current market	800
Developed technology	3,000
In-process research and development	600
Future cost savings from elimination of duplicate assets	1,600
Additional expected revenues from bundling products	1,200

a. Prepare a schedule of the excess of acquisition cost over Ciber's book value and its allocation to Ciber's identifiable net assets and goodwill. (all amounts in thousands)

• When appropriate, use negative signs with your excess of fair value over book value answers (left column only).
• Do not use negative signs in the right column.
• Enter answers in thousands.

Acquisition cost		Answer
Ciber book value		Answer
Excess of acquisition cost over book value		Answer
Excess of fair value over book value:
Current assets	Answer
Plant and equipment, net	Answer
Licenses and trademarks	Answer
Long term liabilities	Answer
Customer contracts	Answer
Brand names	Answer
AnswerAssembled workforceFuture cost savings from duplicate assetsAdditional expected revenuesFavorable leases	Answer
AnswerAssembled workforceFuture cost savings from duplicate assetsDeveloped technologyAdditional expected revenues	Answer
AnswerAssembled workforceIn-process R&DFuture cost savings from duplicate assetsAdditional expected revenues	Answer	Answer
Goodwill		Answer

b. Prepare a working paper to consolidate the balance sheet accounts of Brightcove and Ciber at the date of acquisition. (all amounts in thousands)

Use negative signs with your credit balance answers in the Consolidated Balances column.

Consolidation Working Paper
	Accounts Taken From Books		Eliminations
(in thousands)	Brightcove Dr (Cr)	Ciber Dr (Cr)		Debit	Credit		Consolidated Balances Dr (Cr)
Current assets	$ 140,000	$800			Answer	(R)	Answer
Plant and equipment net	400,000	24,000			Answer	(R)	Answer
Licenses and trademarks	--	10,000	(R)	Answer			Answer
Investment in Ciber	100,000	--			Answer	(E)	Answer
					Answer	(R)	--
Customer contracts	--	--	(R)	Answer			Answer
Brand names	--	--	(R)	Answer			Answer
AnswerAssembled workforceFuture cost savings from duplicate assetsAdditional expected revenuesFavorable leases	--	--	(R)	Answer			Answer
AnswerAssembled workforceFuture cost savings from duplicate assetsDeveloped technologyAdditional expected revenues	--	--	(R)	Answer			Answer
AnswerAssembled workforceIn-process R&DFuture cost savings from duplicate assetsAdditional expected revenues	--	--	(R)	Answer			Answer
Goodwill	--	--	(R)	Answer			Answer
Current liabilities	(160,000)	(1,600)					Answer
Long-term liabilities	(300,000)	(20,000)			Answer	(R)	Answer
Capital stock	(70,000)	(16,000)	(E)	Answer			Answer
Retained earnings	(110,000)	2,800			Answer	(E)	Answer
Total	$ 0	$ 0		Answer	Answer		Answer

c. Prepare the consolidated balance sheet at the date of acquisition, in good form. (all amounts in thousands)

Brightcove, Inc. and Subsidiary Consolidated Balance Sheet Date of Acquisition
Assets		Liabilities
Current assets	Answer	Current liabilities	Answer
Plant and equipment, net	Answer	Long-term liabilities	Answer
Licenses and trademarks	Answer	Total liabilities	Answer
Other identifiable intangible assets	Answer
Goodwill	Answer	Stockholders equity
		Capital stock	Answer
		Retained earnings	Answer
		Total equity	Answer
Total assets	Answer	Total liabilities and equity	Answer