P3.2 LO 4 Homework MBC Consolidation Working Paper, Identifiable Intangibles, Goodwill International Technology Inc. (ITI) acquires all of the voting stock of Global Outsourcing Corporation (GOC) on June 30, 2018. Amounts paid are as follows (in millions): Cash consideration to the former shareholders of GOC 2,000,000 shares of new $1 par common stock issued Registration fees on new stock issued, paid in cash.. Outside legal and advisory services, paid in cash. Fair value of earnings contingency. Norwood $50 60 3 5 2 The earnings contingency provides for a potential payout to the former shareholders of GOC at the end of the third year following acquisition. The balance sheets of both companies immediately prior to the acquisi- tion are as follows. Fair values of GOC's assets and liabilities at the date of acquisition are also provided. ITI GOC Balance Sheets (in millions) Book Value Book Value Fair Value Current assets Property, plant and equipment, net Intangible assets $ 200 500 1,300 $ 10 130 20 $ 15 70 30 Total assets $2,000 $160 $ 20 103 Current liabilities. Long-term liabilities Common stock, par Additional paid-in capital Retained earnings Accumulated other comprehensive income. Treasury stock ...... Total liabilities and equity.. $ 150 1,200 20 550 100 (15) (5) $2,000 $ 20 100 4 60 (25) 3 $160 The intangible assets reported above consist of patents and trademarks. GOC also has the following pre- viously unreported intangible assets that meet ASC Topic 805 requirements for asset recognition: Fair Value Advanced technology. Customer lists $ 5 25 Required a. Prepare the journal entry or entries ITI makes to record the acquisition on its own books. b. Prepare a working paper to consolidate the balance sheets of ITI and GOC at June 30, 2018. P3.2 LO 4 Homework MBC Consolidation Working Paper, Identifiable Intangibles, Goodwill International Technology Inc. (ITI) acquires all of the voting stock of Global Outsourcing Corporation (GOC) on June 30, 2018. Amounts paid are as follows (in millions): Cash consideration to the former shareholders of GOC 2,000,000 shares of new $1 par common stock issued Registration fees on new stock issued, paid in cash.. Outside legal and advisory services, paid in cash. Fair value of earnings contingency. Norwood $50 60 3 5 2 The earnings contingency provides for a potential payout to the former shareholders of GOC at the end of the third year following acquisition. The balance sheets of both companies immediately prior to the acquisi- tion are as follows. Fair values of GOC's assets and liabilities at the date of acquisition are also provided. ITI GOC Balance Sheets (in millions) Book Value Book Value Fair Value Current assets Property, plant and equipment, net Intangible assets $ 200 500 1,300 $ 10 130 20 $ 15 70 30 Total assets $2,000 $160 $ 20 103 Current liabilities. Long-term liabilities Common stock, par Additional paid-in capital Retained earnings Accumulated other comprehensive income. Treasury stock ...... Total liabilities and equity.. $ 150 1,200 20 550 100 (15) (5) $2,000 $ 20 100 4 60 (25) 3 $160 The intangible assets reported above consist of patents and trademarks. GOC also has the following pre- viously unreported intangible assets that meet ASC Topic 805 requirements for asset recognition: Fair Value Advanced technology. Customer lists $ 5 25 Required a. Prepare the journal entry or entries ITI makes to record the acquisition on its own books. b. Prepare a working paper to consolidate the balance sheets of ITI and GOC at June 30, 2018
