Shar PROBLEM 2-2 Required: Prepare the journal entries on the books of Phillips to record the acquisition of Solina Company's net assets. Merger and Consolidation, Goodwill Impairment LO 3 L06 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: Coll Assets Liabilities Common stock, S20 par value Other contributed capital Retained earnings (deficit) Total equities Fair values of assets Acne $3.900.000 $2,030,000 2,000,000 40- (130,000) $3.900,000 $4.200.000 Baltic $7,500,000 $2,200,000 1,800,000 600,000 2.900.000 $7,500,000 $9,000,000 $ 950,000 $ 260,000 540,000 190,000 (40.000) $ 950,000 ob Om $1.300,000 Acme Company shares have a fair value of $50. 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. Required: A. 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 140,000 shares of its common stock to Baltic Company and 40,000 shares of its common stock to Colt Company B. 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 (Baltie and Colt). Acme accumulated the following data: Carrying Value of Fair Value Year Present Value Identifiable Identifiable 2015 of Future Cash Flows Net Assets Net Assets Baltic $6,500,000 $6,340,000 $6,350,000 Colt $1,900,000 1.200,000 1.000.000 Identifiable Net Assets do not include goodwill. T ullinsimman terember 31 2015