P3.12 Identifiable Intangibles and Goodwill (see related P2.6) Prince Corporation, a wholesale ve- LO 4 MBC hicle distributor, acquires all of the stock of Squire Service Corporation for one million shares of Prince stock, valued at $35 per share. Squire becomes a subsidiary of Prince. Professional fees connected with the acquisition are $1,200,000 and costs of registering and issuing the new shares are $600,000, both paid in cash. Squire performs vehicle maintenance services for owners of auto, truck, and bus fleets. The balance sheets of Prince and Squire immediately prior to the acquisition are shown next. Balance Sheets Prince Squire Cash . . . . . $ 2,800,000 $ 300,000 Accounts receivable 6,000,000 2,700,000 Parts inventory . .. 5,200,000 Vehicle inventory . . . . . 15,000,000 Equipment, net . . . 40,000,000 17,600,000 Total assets. . . . $63,800,000 $25,800,000 Current liabilities . . $ 5,000,000 $ 3,100,000 Long-term liabilities 25,000,000 8,600,000 Shareholders' equity . . . . . . 33,800,000 14,100,000 Total liabilities and equity $63,800,000 $25,800,000 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 $2,600,000, and the long-term liabilities have a fair value of $8,000,000. 2. The current replacement cost of the parts inventory is $6,000,000. 3. The current replacement cost of the equipment is $19,500,000. 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 $1,250,000. 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 $2,000,000. 6. Squire has a skilled and experienced workforce. You estimate that the cost to hire and train replace- ments would be $750,000. 7. Squire's trade name is well-known among fleet owners and is estimated to have a fair value of $200,000