Problem 2. On January 2, 2014, Marshall Corporation acquired all of the voting common stock of Tucker Corporation for its own stock worth $10,000,000 in a business combination. Tucker?s condensed balance sheet on January 2, 2014, appears below: Assets Book Value Fair Value Cash and receivables 6,400,000 6,400,000 Inventory 3,800,000 5,800,000 Depreciable plant assets 4,000,000 6,500,000 Other (nondepreciable) assets 3,000,000 3,000,000 Total assets 17,200,000 Liabilities and Stockholder?s Equity Book Value Fair Value Current liabilities 5,000,000 5,000,000 Long-term debt 1,800,000 1,800,000 Capital Stock 2,000,000 Retained Earnings 8,400,000 Total liabilities and equity 17,200,000 Note: On December 31, 2013, a lawsuit alleging defective products and claiming damages of $1,000,000 was filed against Tucker. The estimated liability and related loss, believed to be $800,000, have not yet been accrued. Since the lawsuit had been anticipated, Marshall accepts responsibility for the liability. Required: 3. Calculate the goodwill or gain on bargain acquisition. There are not unrecorded identifiable intangibles. Prepare Marshall?s journal entry to record the Investment in Tucker Corporation. Show all your calculations (2 points) 4. During 2014, new facts are discovered that reset the value of the lawsuit at the date of acquisition to $300,000. Prepare the journal entry to record the change in the value of the lawsuit. Show all your calculations (2 points) Hint: Remember that goodwill or gain on bargain acquisition will be presented in the consolidated financial at the end of 2014. 5. Assume that at the end of 2015, based on events occurring after the acquisition date, the lawsuit was settled out of court for $400,000 in cash. Prepare Tucker?s journal entry to record this event. Show all your calculations (1 points) Assumption: Tucker never accrued the lawsuit prior to the settlement.

Problem 2. On January 2, 2014, Marshall Corporation acquired all of the voting common stock of Tucker Corporation for its own stock worth $10,000,000 in a business combination. Tucker's condensed balance sheet on January 2, 2014, appears below: Assets Book Value Cash and 6,400,000 receivables Inventory 3,800,000 Depreciable plant 4,000,000 assets Other 3,000,000 (nondepreciable) assets Total assets 17,200,00 0 Liabilities and Book Value Stockholder's Equity Current liabilities 5,000,000 Long-term debt 1,800,000 Capital 2,000,000 Stock Retained 8,400,000 Earnings Total 17,200,00 liabilities 0 and equity Fair Value 6,400,000 5,800,000 6,500,000 3,000,000 Fair Value 5,000,000 1,800,000 Note: On December 31, 2013, a lawsuit alleging defective products and claiming damages of $1,000,000 was filed against Tucker. The estimated liability and related loss, believed to be $800,000, have not yet been accrued. Since the lawsuit had been anticipated, Marshall accepts responsibility for the liability. Required: 3. Calculate the goodwill or gain on bargain acquisition. There are not unrecorded identifiable intangibles. Prepare Marshall's journal entry to record the Investment in Tucker Corporation. Show all your calculations (2 points) 4. During 2014, new facts are discovered that reset the value of the lawsuit at the date of acquisition to $300,000. Prepare the journal entry to record the change in the value of the lawsuit. Show all your calculations (2 points) Hint: Remember that goodwill or gain on bargain acquisition will be presented in the consolidated financial at the end of 2014. 5. Assume that at the end of 2015, based on events occurring after the acquisition date, the lawsuit was settled out of court for $400,000 in cash. Prepare Tucker's journal entry to record this event. Show all your calculations (1 points) Assumption: Tucker never accrued the lawsuit prior to the settlement