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Peace Corporation acquired 100 percent of Soft Inc. in a nontaxable transaction on December 31, 20X1. The following balance sheet information is available immediately following the transaction: Peace Corporation Soft Inc. Book Value Fair Values Book Value Fair Values Cash $ 36,093 $ 36, 080 $14, 980 $14, 809 Accounts Receivable, net 55,069 55,080 14, 980 14,809 Inventory 76,989 83, 080 5,980 Deferred Tax Asset 11, Be3 2,980 Investment in Soft 87,082 87,089 Equipment, net 165, 909 290,089 29, 086 41,509 Patent 25,809 Total Assets $64,086 Accounts Payable $ 61,989 $ 61, 989 $ 14,089 $14, 809 Accrued Vacation Payable 12,080 12,989 Deferred Tax Liability 4,909 4,989 ? Long-Term Debt 195,980 115,980 6,980 6,908 Common Stock 125,090 19, 980 Retained Earnings 123,989 30,989 Total Liabilities and Equity $439, 989 $64,090 Additional Information 1. The current and future effective tax rate for both Peace and Soft is 40 percent. 2. The recorded deferred tax asset for Peace relates to the book-tax differences arising from the allowance for doubtful Accounts and the Accrued vacation payable. The expenses associated with each of these amounts will not be deductible for tax purposes until the related accounts receivable are written off or until the employee vacation is actually paid out. 3. The recorded deferred tax asset for Soft is related solely to the book-tax difference arising from the allowance for doubtful accounts. 4. The recorded deferred tax liability in both Peace and Soft relates solely to the book-tax differences arising from the depreciation of their respective equipment. 5. Accumulated depreciation on the financial accounting records of Peace and Soft is $40.000 and $12.000, respectively. 6. The Soft patent was identified by Peace in the due diligence process and has not previously been recorded in the accounting records of Soft. 7. The book and tax bases of all other assets and liabilities of Peace and Soft are the same.\fRequired: a. Compute the tax bases of the assets and liabilities for Peace and Soft, where different from the amounts recorded in the respective accounting records. * Answer is complete but not entirely correct. Peace Tax Basis Soft Tax Basis Calculations Calculations Tax basis of accounts receivable S 84,000 (x 15.000 x Tax basis of accrued vacation payable Tax basis of equipment 160,000 ( 20.500 % Tax basis of patent OV b. Compute the fair value of the deferred tax assets and deferred tax liabilities for Soft. * Answer is complete but not entirely correct. Total DTA 2,000 related Accounts Receivable to Total 23,200 % related DTL Inventory. Equipment, Patent to
