Question
On January 1, 20X2, Plend Corporation acquired all of Stork Corporation's assets and liabilities by issuing shares of its common stock. Partial balance sheet data
On January 1, 20X2, Plend Corporation acquired all of Stork Corporation's assets and liabilities by issuing shares of its common stock. Partial balance sheet data for the companies prior to the business combination and immediately following the combination are as follows:
Plend Corp. | Stork Corp. | ||||||||||||||
Book Value | Book Value | Combined Entity | |||||||||||||
Assets | |||||||||||||||
Cash | $ | 40,000 | $ | 10,000 | $ | 50,000 | |||||||||
Accounts Receivable | 60,000 | 30,000 | 88,000 | ||||||||||||
Inventory | 50,000 | 35,000 | 96,000 | ||||||||||||
Buildings & Equipment (net) | 300,000 | 110,000 | 430,000 | ||||||||||||
Goodwill | ? | ||||||||||||||
Total Assets | $ | 450,000 | $ | 185,000 | $ | ? | |||||||||
Liabilities and Equities | |||||||||||||||
Accounts Payable | $ | 32,000 | $ | 14,000 | $ | 46,000 | |||||||||
Bonds Payable | 150,000 | 70,000 | 220,000 | ||||||||||||
Bond Premium | 6,000 | 6,000 | |||||||||||||
Common Stock, $5 par | 100,000 | 40,000 | 126,000 | ||||||||||||
Additional Paid-In Capital | 65,000 | 28,000 | 247,000 | ||||||||||||
Retained Earnings | 97,000 | 33,000 | ? | ||||||||||||
Total Liabilities & Equities | $ | 450,000 | $ | 185,000 | $ | ? | |||||||||
Required:
e. What amount of goodwill, if any, will be reported by the combined entity immediately following the combination?
f. What balance in retained earnings will the combined entity report immediately following the combination?
g. If the depreciable assets held by Stork had an average remaining life of 10 years at the date of acquisition, what amount of depreciation expense will be reported on those assets in 20X2?
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