Reporting Assets Acquired and Liabilities Assumed

IBM acquires SoftCloud Technologies for $1.20 billion in cash on February 15, 2021. At the acquisition date, the reported assets and liabilities of SoftCloud have fair values as follows:

(in millions)Fair ValueCash and receivables$400Inventories800Property, plant, and equipment3,500Accounts payable300Long-term debt3,850

In addition, the following items are not currently reported on SoftCloud's balance sheet:

(in millions)Fair ValueFavorable lease agreements$150Skilled workforce15Favorable press reviews on products5

Required

Prepare the entry to record the business combination. Note: Show all numbers in millions.

DebitCredit Accounts payableAdditional paid-in capitalCashCash and receivablesCommon stock, $1 parEarnout liabilityFavorable lease agreementsFavorable press reviews on productsGain on earnout (income)GoodwillInventoriesLong-term debtMerger expenses (income)Property, plant, and equipmentSkilled workforce Answer Accounts payableAdditional paid-in capitalCashCash and receivablesCommon stock, $1 parEarnout liabilityFavorable lease agreementsFavorable press reviews on productsGain on earnout (income)GoodwillInventoriesLong-term debtMerger expenses (income)Property, plant, and equipmentSkilled workforce Answer Accounts payableAdditional paid-in capitalCashCash and receivablesCommon stock, $1 parEarnout liabilityFavorable lease agreementsFavorable press reviews on productsGain on earnout (income)GoodwillInventoriesLong-term debtMerger expenses (income)Property, plant, and equipmentSkilled workforce Answer Accounts payableAdditional paid-in capitalCashCash and receivablesCommon stock, $1 parEarnout liabilityFavorable lease agreementsFavorable press reviews on productsGain on earnout (income)GoodwillInventoriesLong-term debtMerger expenses (income)Property, plant, and equipmentSkilled workforce Answer Accounts payableAdditional paid-in capitalCashCash and receivablesCommon stock, $1 parEarnout liabilityFavorable lease agreementsFavorable press reviews on productsGain on earnout (income)GoodwillInventoriesLong-term debtMerger expenses (income)Property, plant, and equipmentSkilled workforce Answer Accounts payableAdditional paid-in capitalCashCash and receivablesCommon stock, $1 parEarnout liabilityFavorable lease agreementsFavorable press reviews on productsGain on earnout (income)GoodwillInventoriesLong-term debtMerger expenses (income)Property, plant, and equipmentSkilled workforce Answer Accounts payableAdditional paid-in capitalCashCash and receivablesCommon stock, $1 parEarnout liabilityFavorable lease agreementsFavorable press reviews on productsGain on earnout (income)GoodwillInventoriesLong-term debtMerger expenses (income)Property, plant, and equipmentSkilled workforce Answer Accounts payableAdditional paid-in capitalCashCash and receivablesCommon stock, $1 parEarnout liabilityFavorable lease agreementsFavorable press reviews on productsGain on earnout (income)GoodwillInventoriesLong-term debtMerger expenses (income)Property, plant, and equipmentSkilled workforce Answer To record acquisition of SoftCloud.

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