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 $30 1,200,000 shares of new $1 par common stock issued 36 Registration fees on new stock issued, paid in cash 1.8 Outside legal and advisory services, paid in cash Fair value of earnings contingency ITI $96 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. GOC Balance Sheets (in millions) Book Value Book Value Fair Value Current assets $120 $6 Property, plant and equipment, net 300 78 Intangible assets 780 Total assets $1,200 Current liabilities $90 $12 Long-term liabilities 720 60 61.8 Common stock, par 2.4 Additional paid-in capital Retained earnings (15) Accumulated other comprehensive income 1.8 Treasury stock (1.2) Total liabilities and equity $1,200 $96 $12 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 Customer lists (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 Merger expenses Common stock Additional paid-in capital Contingent consideration liability Cash (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 ITI Dr (Cr) GOC Dr (Cr) Consolidated Balances Dr (Cr) Debit Credit $ (in millions) Current assets Property, plant and equipment, net Investment in GOC 0 $ 0 0 (R) $ 0 0 0 (R) O (E) O (R) Intangible assets Advanced technology Customer lists Goodwill Current liabilities Long-term liabilities Common stock, $1 par Additional paid-in capital Retained earnings Accumulated other comprehensive income Treasury stock Total: |0|0OOOOOOOOOOOO 0 (E) O (E) 0 (E) 0 (E) 0 0 (E) 0 0 $ 0 $ 0 $ 0 $ $ 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 $30 1,200,000 shares of new $1 par common stock issued 36 Registration fees on new stock issued, paid in cash 1.8 Outside legal and advisory services, paid in cash Fair value of earnings contingency ITI $96 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. GOC Balance Sheets (in millions) Book Value Book Value Fair Value Current assets $120 $6 Property, plant and equipment, net 300 78 Intangible assets 780 Total assets $1,200 Current liabilities $90 $12 Long-term liabilities 720 60 61.8 Common stock, par 2.4 Additional paid-in capital Retained earnings (15) Accumulated other comprehensive income 1.8 Treasury stock (1.2) Total liabilities and equity $1,200 $96 $12 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 Customer lists (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 Merger expenses Common stock Additional paid-in capital Contingent consideration liability Cash (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 ITI Dr (Cr) GOC Dr (Cr) Consolidated Balances Dr (Cr) Debit Credit $ (in millions) Current assets Property, plant and equipment, net Investment in GOC 0 $ 0 0 (R) $ 0 0 0 (R) O (E) O (R) Intangible assets Advanced technology Customer lists Goodwill Current liabilities Long-term liabilities Common stock, $1 par Additional paid-in capital Retained earnings Accumulated other comprehensive income Treasury stock Total: |0|0OOOOOOOOOOOO 0 (E) O (E) 0 (E) 0 (E) 0 0 (E) 0 0 $ 0 $ 0 $ 0 $ $
