Question
Dr. Pepper Snapple Group (DPSG) acquired the assets and liabilities of Turquoise Water Inc. on September 30, 2020, in a merger. The acquisition involves the
- Dr. Pepper Snapple Group (DPSG) acquired the assets and liabilities of Turquoise Water Inc. on September 30, 2020, in a merger. The acquisition involves the following payments:
Cash paid to Turquoise Water shareholders | $85,000,000 |
Cash paid to Morgan Stanley for consulting services | 12,000,000 |
New stock issued, 100,000 shares, $0.50 par, fair value at acquisition | 5,000,000 |
Stock registration fees, paid in cash | 600,000 |
Earnings contingency, to be paid in three years, present value | 2,000,000 |
Turquoise Waters balance sheet just prior to the acquisition appears below. Fair value information on Turquoise Waters assets and liabilities is also provided.
Turquoise Water, Inc. | ||
| Book Value | Fair Value |
Assets |
|
|
Current assets | $ 1,000,000 | $ 800,000 |
Plant and equipment, net | 41,000,000 | 10,000,000 |
Patents and trademarks | 3,400,000 | 20,000,000 |
Total assets | $ 45,400,000 |
|
|
|
|
Liabilities & Equity |
|
|
Current liabilities | $ 400,000 | 400,000 |
Long-term liabilities | 40,000,000 | 41,000,000 |
Common stock, par value | 500,000 |
|
Additional paid-in capital | 8,500,000 |
|
Retained earnings | (2,000,000) |
|
Accumulated OCI | (1,400,000) |
|
Treasury stock | (600,000) |
|
Total liabilities & equity | $ 45,400,000 |
|
In addition to the assets reported on Turquoise Waters balance sheet, the following previously unreported intangible assets are identified:
| Fair Value |
Bottlers franchise rights | $ 10,400,000 |
Skilled workforce | 15,000,000 |
Non-competition agreements | 4,000,000 |
Expected expansion into new product lines | 5,000,000 |
Order backlogs | 2,000,000 |
Required
- Prepare the journal entry DPSG makes to record this acquisition as a merger.
- Now assume DPSG acquires all of the stock of Turquoise Water. Prepare the journal entry DPSG makes to record this acquisition as a stock acquisition.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started