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[The following information applies to the questions displayed below.]
On July 1, TruData Company issues 13,600 shares of its common stock with a $5 par value and a $40 fair value in
exchange for all of Webstat Company’s outstanding voting shares. Webstat’s precombination book and fair
values are shown below along with book values for TruData’s accounts.
TruDataWebstatWebstat
Book ValuesBook ValuesFair Values
Revenues (1/1 to 7/1)$(315,800)$(154,000)
Expenses (1/1 to 7/1) 184,000 74,000
Retained earnings, 1/1 (136,000) (158,000)
Cash and receivables 142,000 78,000 $78,000
Inventory 182,000 144,000 182,000
Patented technology (net) 248,000 192,000 214,000
Land 382,000 214,000 246,000
Buildings and equipment (net) 112,000 84,000 84,000
Liabilies (510,000) (374,000) (352,000)
Common stock (280,000) (62,000)
Addional paid-in capital (8,200) (38,000)
On its acquisition-date consolidated balance sheet, what amount should TruData report as goodwill?
FMV of common stock issued for acquisition
Less: FMV of Net assets of Web
goodwill (excess of FMV of net assets)
544000
452000
92000
[The following information applies to the questions displayed below.]
On July 1, TruData Company issues 13,600 shares of its common stock with a
$5 par value and a $40 fair value in exchange for all of Webstat Company’s
outstanding voting shares. Webstat’s precombination book and fair values are
shown below along with book values for TruData’s accounts.
Revenues (1/1 to 7/1)
Expenses (1/1 to 7/1)
Retained earnings, 1/1
Cash and receivables
Inventory
Patented technology (net)
Land
Buildings and equipment (net)
Liabilities
Common stock
Additional paid-in capital
On its acquisition-date consolidated balance sheet, what amount should TruData report as patented technology (net)?
value of trudata patented tech
value of webstat patented tech (FMV)
total consolidated patented tech
$
(315,800
) $
(154,000
)
184,000 74,000
(136,000 ) (158,000 )
142,000 78,000 $ 78,000
182,000 144,000 182,000
248,000 192,000 214,000
382,000 214,000 246,000
112,000 84,000 84,000
(510,000 ) (374,000 ) (352,000 )
(280,000 ) (62,000 )
(8,200 ) (38,000 )
On its acquisition-date consolidated balance sheet, what amount should TruData report as patented technology (net)?
248000
214000
462000
TruData Webstat Webstat
Book Values Book Values Fair Values
d
c
inventory (FMV)
359500
Land (FMV)
1137750
BUILDINGS (FMV)
2330250
customer relationships
842250
Accounts payable (FMV)
113500
cash
4422250
gain on bargain purchase
134000
4669750
4669750
consideration transferred
cash
4422250
FMV of assets (difference to balance)
4556250
essentially add up debits and credits and use the missing amount to balance the credits.
gain on bargain purchase
-134000
the amount to balance it is your FMV of assets
The following book and fair values were available for Westmont Company as of March 1.
Book ValueFair Value
Inventory$398,500 $359,500
Land 823,500 1,137,750
Buildings 1,965,000 2,330,250
Customer relaonships 0 842,250
Accounts payable (113,500) (113,500)
Common stock (2,000,000)
Addional paid-in capital (500,000)
Retained earnings, 1/1
(399,500)
Revenues (486,000)
Expenses 312,000
essentially add up debits and credits and use the missing amount to balance the credits.
the amount to balance it is your FMV of assets
The following book and fair values were available for Westmont Company as of March 1.
Accounts Casey Kennedy DEBIT CREDIT
CONSOLIDAT
ED TOTALS
Cash
441,000
127,500
568,500
Receivables
1,410,000
378,000
1,788,000
inventory
1,315,000
125,500
1,440,500
investment in kennedy
3,194,000
3,194,000
-
buildings (net)
5,767,500
2,810,000
368,000
8,945,500
licensing agreements
2,810,000
182,000
2,628,000
goodwill
660,500
408,000
1,068,500
Total assets
12,788,000
6,251,000
16,439,000
accounts payable (308,000) (411,000) (719,000)
long-term debt
(3,480,000)
(3,240,000)
(6,720,000)
Common stock
(3,000,000)
(1,000,000)
1,000,000
(3,000,000)
APIC
(500,000)
500,000
-
Retained earnings
(6,000,000)
(1,100,000)
1,100,000
(6,000,000)
Total liabs and equity
(12,788,000)
(6,251,000)
3,376,000
3,376,000
(16,439,000)
On January 1, 2021, Casey Corporation exchanged $3,194,000 cash for 100 percent of the outstanding voting stock of Kennedy
Corporation. Casey plans to maintain Kennedy as a wholly owned subsidiary with separate legal status and accounting information
systems.
At the acquisition date, Casey prepared the following fair-value allocation schedule:
Fair value of Kennedy (consideraon transferred) $3,194,000
On January 1, 2021, Casey Corporation exchanged $3,194,000 cash for 100 percent of the outstanding voting stock of Kennedy
Corporation. Casey plans to maintain Kennedy as a wholly owned subsidiary with separate legal status and accounting information
At the acquisition date, Casey prepared the following fair-value allocation schedule:
Pratt Company acquired all of the outstanding shares of Spider, Inc., on December 31, 2021, for $507,950 cash. Pratt will operate Spider as a wholly owned subsidiary with a separate legal and
accounting identity. Although many of Spider’s book values approximate fair values, several of its accounts have fair values that differ from book values. In addition, Spider has internally developed
assets that remain unrecorded on its books. In deriving the acquisition price, Pratt assessed Spider’s fair and book value differences as follows:
Book Values Fair Values
Computer software $ 29,000 $ 78,600
Equipment 55,800 40,700
Client contracts 0 114,000
In-process research and development 0 30,500
Notes payable (72,900 ) (81,950 )
At December 31, 2021, the following financial information is available for consolidation (credit balances in parentheses):
Pratt Spider
Cash $ 8,950 $ 18,400
Receivables 103,500 87,000
Inventory 152,500 86,000
Investment in Spider 507,950 0
Computer software 227,000 29,000
Buildings (net) 604,750 130,500
Equipment (net) 358,000 55,800
Client contracts 0 0
Goodwill 0 0
Total assets $ 1,962,650 $ 406,700
Accounts payable $ (90,400 ) $ (44,000 )
Notes payable (514,250 ) (72,900 )
Common stock (380,000 ) (100,000 )
Additional paid-in capital (170,000 ) (25,000 )
Retained earnings (808,000 ) (164,800 )
Total liabilities and equities $ (1,962,650 ) $ (406,700 )
Pratt Company acquired all of the outstanding shares of Spider, Inc., on December 31, 2021, for $507,950 cash. Pratt will operate Spider as a wholly owned subsidiary with a separate legal and
accounting identity. Although many of Spider’s book values approximate fair values, several of its accounts have fair values that differ from book values. In addition, Spider has internally developed
assets that remain unrecorded on its books. In deriving the acquisition price, Pratt assessed Spider’s fair and book value differences as follows:
Book Values Fair Values
Computer software $ 29,000 $ 78,600
Equipment 55,800 40,700
Client contracts 0 114,000
In-process research and development 0 30,500
Notes payable (72,900 ) (81,950 )
At December 31, 2021, the following financial information is available for consolidation (credit balances in parentheses):
Cash $ 8,950 $ 18,400
Receivables 103,500 87,000
Inventory 152,500 86,000
Investment in Spider 507,950 0
Computer software 227,000 29,000
Buildings (net) 604,750 130,500
Equipment (net) 358,000 55,800
Client contracts 0 0
Total assets $ 1,962,650 $ 406,700
Accounts payable $ (90,400 ) $ (44,000 )
Notes payable (514,250 ) (72,900 )
Common stock (380,000 ) (100,000 )
Additional paid-in capital (170,000 ) (25,000 )
Retained earnings (808,000 ) (164,800 )
Total liabilities and equities $ (1,962,650 ) $ (406,700 )
Accounts
newtune
newtune adj
New Newtune
on the go
combo
Cash
38700
-37050
1650
45750
84450
Receivables
82250
-2500
79750
54000
133750
trademarks
410000
192750
602750
110750
713500
record music catalog
923000
186750
1109750
84750
1194500
r&d
255750
255750
255750
equipment (net)
340000
340000
115000
455000
goodwill
32900
32900
32900
Total assets
1831000
595700
2426700
410250
2836950
accounts payable
-148000
-148000
-35000
-183000
On January 1, NewTune Company exchanges 19,681 shares of its common stock for all of the outstanding shares of On-the-Go, Inc. Each of NewTune’s shares has a $4 par value and a $50 fair value. The
fair value of the stock exchanged in the acquisition was considered equal to On-the-Go’s fair value. NewTune also paid $37,050 in stock registration and issuance costs in connection with the merger.
Several of On-the-Go’s accounts’ fair values differ from their book values on this date (credit balances in parentheses):
Book Values Fair Values
Receivables $ 54,000 $ 51,500
Trademarks 110,750 303,500
Record music catalog 84,750 271,500
In-process research and development 0 255,750
Notes payable (65,250 ) (56,850 )
Precombination book values for the two companies are as follows:
NewTune On-the-Go
Cash $ 75,750 $ 45,750
Receivables 82,250 54,000
Trademarks 410,000 110,750
Record music catalog 923,000 84,750
Equipment (net) 340,000 115,000
Total Assets $ 1,831,000 $ 410,250
Accounts payable $ (148,000 ) $ (35,000 )
Notes payable (436,000 ) (65,250 )
Common stock (400,000 ) (50,000 )
Additional paid-in capital (30,000 ) (30,000 )
Retained earnings (817,000 ) (230,000 )
Total liabilities and equities $ (1,831,000 ) $ (410,250 )
notes payable
-436000
8400
-427600
-65250
-492850
common stock
-400000
-78724
-478724
0
-478724
additional paid in capital
-30000
-942376
-972376
-30000
-1002376
retained earnings
-817000
-817000
-230000
-1047000
Total liabs and equity
-1831000
-1831000
-3662000
-410250
-4072250
Casey Kennedy DEBIT CREDIT
CONSOLIDATED
TOTALS
Cash
Receivables
441,000
127,500
568,500
inventory
1,410,000
378,000
1,788,000
investment in kennedy
1,315,000
125,500
1,440,500
buildings (net)
3,194,000
3,194,000
-
licensing agreements
5,767,500
2,810,000
368,000
8,945,500
goodwill
2,810,000
182,000
2,628,000
Total assets
660,500
408,000
1,068,500
accounts payable
12,788,000
6,251,000
16,439,000
long-term debt (308,000) (411,000) (719,000)
Common stock
(3,480,000)
(3,240,000)
(6,720,000)
APIC
(3,000,000)
(1,000,000)
1,000,000
(3,000,000)
Retained earnings
(500,000)
500,000
-
Total liabs and equity
(6,000,000)
(1,100,000)
1,100,000
(6,000,000)
(12,788,000)
(6,251,000)
3,376,000
3,376,000
(16,439,000)
goodwill = consideration - fair value of net assets
consideration
984050
fv assets
fv liab
fv net assets
goodwill
32900
78724
On January 1, NewTune Company exchanges 19,681 shares of its common stock for all of the outstanding shares of On-the-Go, Inc. Each of NewTune’s shares has a $4 par value and a $50 fair value. The
fair value of the stock exchanged in the acquisition was considered equal to On-the-Go’s fair value. NewTune also paid $37,050 in stock registration and issuance costs in connection with the merger.
Several of On-the-Go’s accounts’ fair values differ from their book values on this date (credit balances in parentheses):
Book Values Fair Values
Receivables $ 54,000 $ 51,500
Trademarks 110,750 303,500
Record music catalog 84,750 271,500
In-process research and development 0 255,750
Notes payable (65,250 ) (56,850 )
Precombination book values for the two companies are as follows:
NewTune On-the-Go
Cash $ 75,750 $ 45,750
Receivables 82,250 54,000
Trademarks 410,000 110,750
Record music catalog 923,000 84,750
Equipment (net) 340,000 115,000
Total Assets $ 1,831,000 $ 410,250
Accounts payable $ (148,000 ) $ (35,000 )
Notes payable (436,000 ) (65,250 )
Common stock (400,000 ) (50,000 )
Additional paid-in capital (30,000 ) (30,000 )
Retained earnings (817,000 ) (230,000 )
Total liabilities and equities $ (1,831,000 ) $ (410,250 )
