Identifiable Intangibles and Goodwill Prince Corporation, a wholesale vehicle distributor, acquires all of the stock of Squire Service Corporation for one million shares of Prince stock, valued at $21 per share. Squire becomes a subsidiary of Prince. Professional fees connected with the acquisition are $720,000 and costs of registering and issuing the new shares are $600,000, both paid in cash. The balance sheets of Prince and Squire immediately prior to the acquisition are shown next Balance Sheets Cash Prince $1,680,000 Squire $180,000 Accounts receivable i 3,600,000 1,620,000 Parts inventory Vehicle inventory Equipment, net Total assets 3,120,000 9,000,000 24,000,000 10,560,000 $38,280,000 $15,480,000 Current lubilities Long-term liabilities Shareholders' equity $3,000,000 $1,860,000 15,000,000 5,160,000 20,280,000 8,460,000 Total liabilities and equity $38,280,000 $15,480,000 O Total liabilities and equity $38,280,000 $15,450,000 In reviewing Squire's assets and liabilities, you determine the following: 1. On a discounted present value basis, the accounts receivable have a fair value of $1,560,000, and the long-term liabilities have a fair value of $4,800,000. 2. The current replacement cost of the parts inventory is $3,600.000. 3. The current replacement cost of the equipment is $11,700,000. 4. Squire occupies its service facilities under an operating lease with ten years remaining. The rent is below current market levels, giving the lease an estimated fair value of $750,000. 5. Squire has long-term service contracts with several large fleet owners. These contracts have been profitable: the present value of expected profits over the remaining term of the contracts is estimated at $1,200,000. 6. Squire has a skilled and experienced work force. You estimate that the cost to hire and train replacements would be $450,000. 7. Squire's trade name is well-known among fleet owners and is estimated to have a fair value of $120,000. (a) Prepare the acquisition entry and a working paper to consolidate the balance sheets of Prince and Squire as of the date of acquisition (in thousands). Et aur antwers in thousands. For example, $21,000,000 is $21,000 in thousands. The account balances for Prince, shown in the working paper below, reflect the above entry. Merger expenses reduce retained earnings, a component of stockholders' equity. Use negative signs with your credit balance answers in the Dr (Cr) columns. Enter your answers in thousands. For example, $3,600,000 is $3,600 in thousands. Consolidation Working Paper Accounts Taken From Books Eliminations Prince Squire Consolidated Balances (in thousands) Dr (Cr) Dr (Cr) Debit Credit Dr (Cr) Cash 1,680 5 Accounts receivable 0 1.800 D 0 0 (R) 0 Parts inventory 0 (R) 0 0 Vehicle inventory 0 Equipment, net 0 (R) 0 0 Investment in Squire a 010 0 (R) Intangible: Lease Intangible: Service contracts intangible: Trade name Goodwill BERE (R) D 0 0: 0 0 D (R) 0 Accounts receivable 0 Parts inventory 0 (R) 0 Vehicle inventory 0 Equipment, net 0 0 (R) Investment in Squire 0 003 (R) Intangible: Lease Intangible: Service contracts Intangible: Trade name Goodwill Currerit liabilities 0 Long-termiabilities 0 (8) Shareholders equity 0(E) 0 0 0 0 0 0 0 0 Total $ 05 0 S 05 0 $ 0 Dashboard Alisson Carrera (b) If the acquisition was a merger, Prince records Squire's assets and liabilities directly on its own books. Prepare Prince's entry to record the merger, and compare Prince's balance sheet immediately after the entry is booked with the consolidated balance sheet in part a (in thousands). Enter your answers in thousands. For example, $3,600,000 is $3,600 in thousands. General Journal Description Debit Credit Cash 0 Accounts receivable 0 Parts inventory O 0 Equipment, net 0 0 Intangible: Lease 0 Intangible: Service Contracts 0 0 Intangible: Trade Name : 0 Goodwill 0 0 0 0 0 Current liabilities 0 Long-term liabilities 0 Capital Stock- 0 D G