Question
In: Accounting
SafeData Corporation has the following account balances and respective fair values on June 30: Book Values...
SafeData Corporation has the following account balances and respective fair values on June 30:
| Book Values | Fair Values | ||||||
| Receivables | $ | 106,000 | $ | 106,000 | |||
| Patented technology | 192,000 | 192,000 | |||||
| Customer relationships | 0 | 484,000 | |||||
| In-process research and development | 0 | 324,000 | |||||
| Liabilities | (472,000 | ) | (472,000 | ) | |||
| Common stock | (100,000 | ) | |||||
| Additional paid-in capital | (300,000 | ) | |||||
| Retained earnings deficit, 1/1 | 676,000 | ||||||
| Revenues | (410,000 | ) | |||||
| Expenses | 308,000 | ||||||
Privacy First, Inc., obtained all of the outstanding shares of SafeData on June 30 by issuing 20,000 shares of common stock having a $1 par value but a $50 fair value. Privacy First incurred $10,000 in stock issuance costs and paid $50,000 to an investment banking firm for its assistance in arranging the combination. In negotiating the final terms of the deal, Privacy First also agrees to pay $75,000 to SafeData’s former owners if it achieves certain revenue goals in the next two years. Privacy First estimates the probability adjusted present value of this contingent performance obligation at $22,500.
- What is the fair value of the consideration transferred in this combination?
- How should the stock issuance costs appear in Privacy First’s postcombination financial statements?
- How should Privacy First account for the fee paid to the investment bank?
- How does the issuance of these shares affect the stockholders’ equity accounts of Privacy First, the parent?
- How is the fair value of the consideration transferred in the combination allocated among the assets acquired and the liabilities assumed?
- If Privacy First’s stock had been worth only $25 per share rather than $50, how would the consolidation of SafeData’s assets and liabilities have been affected?
req 1:
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req2:
How should the stock issuance costs appear in Privacy First’s postcombination financial statements?
|
req:3
How should Privacy First account for the fee paid to the investment bank?
|
req4
How does the issuance of these shares affect the stockholders’ equity accounts of Privacy First, the parent?
|
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req5
How is the fair value of the consideration transferred in the combination allocated among the assets acquired and the liabilities assumed?
|
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req6
If Privacy First’s stock had been worth only $25 per share rather than $50, how would the consolidation of SafeData’s assets and liabilities have been affected?
|
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Solutions
ekkarill92 answered 1 year agoRelated Solutions
SafeData Corporation has the following account balances and respective fair values on June 30: Book Values...
SafeData Corporation has the following account balances and
respective fair values on June 30:
Book Values
Fair Values
Receivables
$
103,500
$
103,500
Patented technology
109,000
109,000
Customer relationships
0
670,000
In-process research and
development
0
338,000
Liabilities
(578,000
)
(578,000
)
Common stock
(100,000
)
Additional paid-in capital
(300,000
)
Retained earnings deficit,
1/1
853,500
Revenues
(340,000
)
Expenses
252,000
Privacy First, Inc., obtained all of the outstanding shares of
SafeData on June 30 by issuing 20,000 shares of...
SafeData Corporation has the following account balances and respective fair values on June 30: Book Values...
SafeData Corporation has the following account balances and
respective fair values on June 30:
Book Values
Fair Values
Receivables
$
108,000
$
108,000
Patented technology
123,000
123,000
Customer relationships
0
840,000
In-process research and development
0
524,000
Liabilities
(596,000
)
(596,000
)
Common stock
(100,000
)
Additional paid-in capital
(300,000
)
Retained earnings deficit, 1/1
847,400
Revenues
(312,000
)
Expenses
229,600
Privacy First, Inc., obtained all of the outstanding shares of
SafeData on June 30 by issuing 20,000 shares of...
The following account balances were included in the trial balance of Twain Corporation at June 30,...
The following account balances were included in the trial
balance of Twain Corporation at June 30, 2017.
Sales revenue
$1,578,500
Depreciation expense (office furniture and equipment)
$7,250
Sales discounts
31,150
Property tax expense
7,320
Cost of goods sold
896,770
Bad debt expense (selling)
4,850
Salaries and wages expense (sales)
56,260
Maintenance and repairs expense (administration)
9,130
Sales commissions
97,600
Office expense
6,000
Travel expense (salespersons)
28,930
Sales returns and allowances
62,300
Delivery expense
21,400
Dividends received
38,000
Entertainment expense
14,820...
The following account balances were included in the trial balance of Sarasota Corporation at June 30,...
The following account balances were included in the trial
balance of Sarasota Corporation at June 30, 2020:
Sales revenue
$1,839,650
Telephone and Internet expense (office)
$3,620
Cost of goods sold
1,061,770
Salaries and wages (office)
7,920
Salaries and wages expense (sales)
53,260
Supplies expense (sales)
5,050
Sales commission expense
99,000
Repairs and maintenance expense (office)
9,430
Advertising expense (sales)
29,130
Depreciation understatement due to error—2018 (net of tax of
$3,300)
18,400
Freight out
21,700
Miscellaneous expense (office)
6,500
Entertainment expense...
The following account balances were included in the trial balance of Sarasota Corporation at June 30,...
The following account balances were included in the trial
balance of Sarasota Corporation at June 30, 2017. Sales revenue $
1,579,860 Depreciation expense (office furniture and equipment) $
6,762 Sales discounts 31,690 Property tax expense 6,843 Cost of
goods sold 897,100 Bad debt expense (selling) 4,503 Salaries and
wages expense (sales) 56,690 Maintenance and repairs expense
(administration) 8,281 Sales commissions 98,950 Office expense
5,980 Travel expense (salespersons) 31,900 Sales returns and
allowances 63,694 Delivery expense 23,150 Dividends received 39,910
Entertainment...
Create Journal entries for the following: Account Balances June 30, 2016 June 30, 2017 Debits Cash...
Create Journal
entries for the following:
Account Balances
June 30, 2016
June 30, 2017
Debits
Cash
$ 361,700
$ 880,550
Accounts Receivable
100,000
125,000
Marketable Securities (at
cost)
11,700
13,000
Allowance for Change in
Value
1,500
1,800
Construction in Process
168,750
405,000
Prepaid Expenses
45,000
10,000
Investments (long-term)
-
13,500
Leased Equipment
-
20,000
Building
30,000
-
Deferred tax asset
5,375
2,200...
The following is the ending balances of accounts at June 30, 2021, for Excell Company. Account...
The following is the ending balances of accounts at June 30,
2021, for Excell Company.
Account Title
Debits
Credits
Cash
$
91,000
Short-term investments
73,000
Accounts receivable (net)
288,000
Prepaid expenses (for the next 12 months)
40,000
Land
83,000
Buildings
328,000
Accumulated depreciation—buildings
$
164,000
Equipment
269,000
Accumulated depreciation—equipment
124,000
Accounts payable
177,000
Accrued liabilities
49,000
Notes payable
108,000
Mortgage payable
210,000
Common stock
140,000
Retained earnings
200,000
Totals
$
1,172,000
$
1,172,000
Additional information:
The short-term investments account includes...
The following is the ending balances of accounts at June 30, 2021, for Excell Company. Account...
The following is the ending balances of accounts at June 30,
2021, for Excell Company.
Account Title
Debits
Credits
Cash
$
91,000
Short-term investments
73,000
Accounts receivable (net)
288,000
Prepaid expenses (for the next 12 months)
40,000
Land
83,000
Buildings
328,000
Accumulated depreciation—buildings
$
164,000
Equipment
269,000
Accumulated depreciation—equipment
124,000
Accounts payable
177,000
Accrued liabilities
49,000
Notes payable
108,000
Mortgage payable
210,000
Common stock
140,000
Retained earnings
200,000
Totals
$
1,172,000
$
1,172,000
Additional information:
The short-term investments account includes...
The following is the ending balances of accounts at June 30, 2018 for Excell Company. Account...
The following is the ending balances of accounts at June 30,
2018 for Excell Company.
Account Title
Debits
Credits
Cash
$
121,000
Short-term investments
103,000
Accounts receivable
318,000
Prepaid expenses
70,000
Land
113,000
Buildings
358,000
Accumulated depreciation—buildings
$
179,000
Equipment
284,000
Accumulated depreciation—equipment
139,000
Accounts payable
192,000
Accrued expenses
64,000
Notes payable
138,000
Mortgage payable
320,000
Common stock
290,000
Retained earnings
45,000
Totals
$
1,367,000
$
1,367,000
Additional information:
The short-term investments account includes $37,000 in U.S.
treasury bills purchased...
On May 1, Soriano Co. reported the following account balances along with their estimated fair values:...
On May 1, Soriano Co. reported the following account balances
along with their estimated fair values:
Carrying Amount
Fair Value
Receivables
$
152,400
$
152,400
Inventory
85,600
85,600
Copyrights
174,000
558,000
Patented technology
836,000
618,000
Total assets
$
1,248,000
$
1,414,000
Current liabilities
$
188,000
$
188,000
Long-term liabilities
664,000
649,700
Common stock
100,000
Retained earnings
296,000
Total liabilities and equities
$
1,248,000
On that day, Zambrano paid cash to acquire all of the assets and
liabilities of Soriano, which...
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