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Ex. 1) Amount of Investment: Cash Legal Fees Total Investment $ $ 400,000.00 40,000.00 440,000.00 2) Will not calculate the APIC as there is no common stock paid 3) Calculate the Goodwill Goodwill= Total amount of investment - total net assets =440000-(1,260,000 - 760,000) (60,000.00) Details Assets Cash Receivales Inventory Plant assets Equipment Land Investment in Securities Total Assets Liabilities & Equity Current Liabilities Long-term debt Common Stocks APIC Total Liabilities & Equity Amount Adjustment 920,000.00 270,000.00 310,000.00 1,430,000.00 140,000.00 3,070,000.00 (440,000.00) 200,000.00 846,000.00 94,000.00 60,000.00 760,000.00 350,000.00 900,000.00 1,600,000.00 220,000.00 3,070,000.00 240,000.00 520,000.00 760,000.00 *) Negative Goodwill be reduced from total Non-Current asset of the combinee Plant assets = 900,000 900000+100000 Goodwill plant assets % = (60000)*90% (54,000.00) Land = 100,000.00 1,000,000.00 Goodwill land (60000)*10% (6,000.00) 90% 10% Consolicated 480,000.00 470,000.00 310,000.00 2,276,000.00 140,000.00 94,000.00 60,000.00 3,830,000.00 590,000.00 1,420,000.00 1,600,000.00 220,000.00 3,830,000.00 Exercise 3 (business combination): - Davis Corporation (combinor) acquired all the net assets of Fairmont Corporation (combinee) for $400,000 cash. Davis paid legal fees $40,000 cash. The balance sheet of Fairmont Corporation prior to the business combination is as follows: Assets Receivables Investment in securities Plant assets Land Total Assets Liabilities & Stockholder's Equity Current liabilities Long - term debt Common Stocks Deficit Total Liabilities & Stockholder's Equity Carrying Amounts 190,000 50,000 Current Fair Value 200,000 60,000 870,000 90,000 1,200,000 Carrying Amounts 900,000 100,000 1,260,000 Current Fair Value 240,000 500,000 600,000 (140,000) 1200,000 240,000 520,000 --760,000 The balance sheet of Davis Corporation prior to the business combination is as follows: Assets Cash Receivables Inventory Plant assets Equipment Total Assets Liabilities & Stockholder's Equity Current liabilities Long - term debt Common Stocks APIC Total Liabilities & Stockholder's Equity Carrying Amounts 920,000 270,000 310,000 1,430,000 140,000 3,070,000 Carrying Amounts 350,000 900,000 1,600,000 220,000 3,070,000 Required:Prepare working paper to recognize combination process and then prepare consolidated balance sheet