Consolidation Working Paper, Identifiable Intangibles, Goodwill

International Technology Inc. $($ITI$)$ acquires all of the voting stock of Global Outsourcing Corporation $($GOC$)$ on June $30,2010.$ Amounts paid are as follows $($in millions$)$:

Cash consideration to the former shareholders of GOC $$60$

$1,200,000$ shares of new $$1$ par common stock issued $72$

Registration fees on new stock issued, paid in cash $3\mathrm{.}6$

Outside legal and advisory services, paid in cash $6$

Fair value of earnings contingency $2\mathrm{.}4$

The earnings contingency provides for a potential payout to the former shareholders of GOC at the end of the third year following acquisition. The balance sheets of both companies immediately prior to the acquisition are as follows. Fair values of GOC's assets and liabilities at the date of acquisition are also provided.

ITI GOC

Balance Sheets $($in millions$)$ Book Value Book Value Fair Value

Current assets $$240$ $$12$ $$18$

Property, plant and equipment, net $60015684$

Intangible assets $1,5602436$

Total assets $$2,400$ $$192$

Current liabilities $$180$ $$24$ $$24$

Long$-$term liabilities $1,440120123\mathrm{.}6$

Common stock, par $244\mathrm{.}8$

Additional paid$-$in capital $66072$

Retained earnings $120(30)$

Accumulated other comprehensive income $(18)3\mathrm{.}6$

Treasury stock $(6)(2\mathrm{.}4)$

Total liabilities and equity $$2,400$ $$192$

The intangible assets reported above consist of patents and trademarks. GOC also has the following previously unreported intangible assets that meet ASC Topic $805$ requirements for asset recognition:

Fair Value

Advanced technology $$6$

Customer lists $30$

$($a$)$ Prepare the journal entry or entries ITI makes to record the acquisition on its own books $($in millions and enter all decimal places$).$

General Journal

Description Debit Credit

Investment in GOC Answer

Answer

$0$

Answer

Merger expenses

Answer

Answer

$0$

Common stock Answer

$0$

Answer

Additional paid$-$in capital Answer

$0$

Answer

Answer

Contingent consideration liability

Answer

$0$

Answer

Cash Answer

$0$

Answer

$($b$)$ Prepare a working paper to consolidate the balance sheets of ITI and GOC at June $30,2010.$

Enter answers in millions and enter all decimal places. Remember to use negative signs with your credit balance answers in the Dr $($Cr$)$ columns.

Consolidation Working Paper

Accounts Taken From Books Eliminations

$($in millions$)$

ITI

Dr $($Cr$)$

GOC

Dr $($Cr$)$

Debit

Credit Consolidated

Balances

Dr $($Cr$)$

Current assets Answer

$42\mathrm{.}6$

Answer

$0$

$($R$)$ Answer

$0$

Answer

$0$

Property, plant and equipment, net Answer

$1\mathrm{.}5$

Answer

$0$

Answer

$0$

$($R$)$ Answer

$0$

Investment in GOC Answer

$0$

Answer

$0$

$($E$)$ Answer

$0$

Answer

$0$

$($R$)$

Intangible assets Answer

$0$

Answer

$0$

$($R$)$ Answer

$0$

Answer

$0$

Advanced technology $----($R$)$ Answer

$0$

Answer

$0$

Customer lists $----($R$)$ Answer

$0$

Answer

$0$

Goodwill $----($R$)$ Answer

$0$

Answer

$0$

Current liabilities Answer

$0$

Answer

$0$

Answer

$0$

Long$-$term liabilities Answer

$0$

Answer

$0$

Answer

$0$

$($R$)$ Answer

$0$

Common stock, $$1$ par Answer

$0$

Answer

$0$

$($E$)$ Answer

$0$

Answer

$0$

Additional paid$-$in capital Answer

$0$

Answer

$0$

$($E$)$ Answer

$0$

Answer

$0$

Retained earnings Answer

$0$

Answer

$0$

Answer

$0$

$($E$)$ Answer

$0$

Accumulated other comprehensive income Answer

$0$

Answer

$0$

$($E$)$ Answer

$0$

Answer

$0$

Treasury stock Answer

$0$

Answer

$0$

Answer

$0$

$($E$)$ Answer

$0$

Total: Answer

$0$

Answer

$0$

Answer

$0$

Incorrect

Mark $0\mathrm{.}00$ out of $1\mathrm{.}00$ Answer

$0$

Answer

$0$