On January 1, Prine, Inc., acquired 100 percent of Lydia Companys common stock for a fair value of $123,975,500 in cash and stock Lydia's assets and liabilities equaled their fair values except for its equipment, which was undervalued by $675,000 and had a 10-year remaining life. Prine specializes in media distribution and viewed its acquisition of Lydia as a strategic move into content ownership and creation. Prine expected both cost and revenue synergies from controlling Lydia's artistic content (a large library of classic movies) and its sports programming specialty video operation. Accordingly, Prine allocated Lydia's assets and liabilities (including $52,912,500 of goodwill) to a newly formed operating segment appropriately designated as a reporting unit. The fair values of the reporting unit's identifiable assets and liabilities through the first year of operations were as follows. 12/31 $ 252,000 375,500 600,000 1,215,000 40,900,000 61,270,000 Broadcast licenses (indefinite remaining 1ife) 15,180,000 20,830,000 20,790,000 19,810,000 Receivables (net) Movie library (25-year remaining life) Equipment (10-year remaining life) Current liabilities (579,000) (652,500) (6,080,000) (6,260,000) However, Lydia's assets have taken longer than anticipated to produce the expected synergies with Prine's operations. Accordingly, Prine reviewed events and circumstances and concluded that Lydia's fair value was likely less than its carrying amount. At year-end, Prine reduced its assessment of the Lydia reporting unit's fair value to $114,068,000. At December 31, Prine and Lydia submitted the following balances for consolidation. There were no intra-entity payables on that date. Lydia Co. 15,500,000 17,600,000 100,000 Prine, Inc s (20,700,000) $(18,000,000) Equity in Lydia earnings Dividends declared Retained earnings, 1/1 (332,500) 200,000 (59,700,000) (2,888,000) 387,000 445,000 375,500 1,215,000 124,208,000 Broadcast licenses Movie library Equipment (net) 367,500 600,000 13,720,000 48,000,000 17,000,000 141,700,000 liabilities (975,000) (472,500) (26,700,000) (9,150,000) (175,000,000) (67,500,000) Long-term debt Prev 6 of 13 Next >