Problem 2-2 Stockholders of Acme Company, Baltic Company, and Colt Company are considering alternative arrangements for a business combination. Balance sheets and the fair values of each company's assets on October 1, 2014, were as follows: Assets Liabilities Common stock, $20 par value Other contributed capital Retained earnings (deficit) Total equities Fair values of assets Acme $3,912,550 $2,017,880 2,003,200 -O- (108,530) $3,912,550 $4,184,730 Baltic Colt $7,542,300 $946,340 $2,183,540 $260,830 1,794,900 541,110 604,380 191,520 2,959,480 (47,120 ) $7,542,300 $946,340 $9,034,300 $1,292,080 Acme Company shares have a fair value of $52. A fair (market) price is not available for shares of the other companies because they are closely held. Fair values of liabilities equal book values. (a) Your answer is correct. Prepare a balance sheet for the business combination. Assume the following: Acme Company acquires all the assets and assumes all the liabilities of Baltic and Colt Companies by issuing in exchange 139,300 shares of its common stock to Baltic Company and 39,740 shares of its common stock to Colt Company. (List assets in order of liquidity. Enter negative account balance with negative sign preceding the number e.g. -5,125 or parentheses e.g. (5,125).) ACME COMPANY Balance Sheet Prepare a balance sheet for the business combination. Assume the following: Acme Company acquires all the assets and assumes all the liabilities of Baltic and Colt Companies by issuing in exchange 139,300 shares of its common stock to Baltic Company and 39,740 shares of its common stock to Colt Company. (List assets in order of liquidity. Enter negative account balance with negative sign preceding the number e.g. -5,125 or parentheses e.g. (5,125).) ACME COMPANY Balance Sheet October 1, 2014 Assets Assets (except goodwill) 14,238,930 Goodwill 1,428,070 Total Assets 15667000 Liabilities and Stockholders' Equity Liabilities 4,462,250 Common Stock 5,584,000 Other Contributed Capital 5,729,280 Retained Earnings -108530 Total Liabilities and Stockholders' Equity 15667000 Click if you would like to Show Work for this question: Open Show Work * Your answer is incorrect. Try again. Assume, further, that the acquisition was consummated on October 1, 2014, as described above. However, by the end of 2015, Acme was concerned that the fair values of one or both of the acquired units had deteriorated. To test for impairment, Acme decided to measure goodwill impairment using the present value of future cash flows to estimate the fair value of the reporting units (Baltic and Colt). Acme accumulated the following data: Year Present Value 2015 of Future Cash Flows Baltic $6,487,000 Colt $1,908,620 Carrying Value of Identifiable Net Assets $6,337,470 $1,209,430 Fair Value Identifiable Net Assets $6,347,470 $1,009,430 - Identifiable Net Assets do not include goodwill. Prepare the journal entry, if needed, to record goodwill impairment at December 31, 2015. (If no entry is required, select "No Entry" for the account titles and enter o for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Debit Credit Account Titles and Explanation No Entry 0 No Entry ... to chow Work for this question: Open Show Work
