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In: Accounting

   On January 1, 2016, A Corp. issued shares of its common stock to acquire all of...

   On January 1, 2016, A Corp. issued shares of its common stock to acquire all of the outstanding common stock of B Inc. B’s book value was only $140,000 at the time, but A issued 12,000 shares having a par value of $1 per share and a fair value of $20 per share. A was willing to convey these shares because it felt that buildings (ten-year life) were undervalued on B's records by $60,000 while equipment (five-year life) was undervalued by $25,000. Any consideration transferred over fair value of identified net assets acquired is assigned to goodwill. Following are the individual financial records for these two companies for the year ended December 31, 2019.

              

A

B

Corp.

Inc.

Revenues

$ 372,000

$108,000

Expenses

    (264,000)

   (72,000)

Equity in subsidiary earnings

     25,000

           0

Net income

$ 133,000

$ 36,000

Retained earnings, January 1, 2019

$ 765,000

$102,000

Net income (above)

    133,000

   36,000

Dividends paid

     (84,000)

   (24,000)

Retained earnings, December 31, 2019

$ 814,000

$114,000

Current assets

$ 150,000

$ 22,000

Investment in B Inc.

    242,000

           0

Buildings (net)

    525,000

   85,000

Equipment (net)

     389,250

129,000

Total assets

$1,306,250

$236,000

Liabilities

$   82,250

$ 50,000

Common stock

   360,000

    72,000

Additional paid-in capital

     50,000

           0

Retained earnings, December 31, 2019 (above)

    814,000

114,000

Total liabilities and stockholders’ equity

$1,306,250

$236,000

           

            Required:

Calculate the Fair Value in excess of book value and prepare a schedule to determine the amount of goodwill if any, amortization and allocation – as we have done numerous time in class.

Prepare a schedule to determine the amount of goodwill if any, amortization and allocation

Prepare and write-up the journal entries to record on the consolidating worksheet. You can number and record the entries any way you like as long as you are consistent, and you label the entries accordingly.

Record the journal entries to the consolidated worksheet and complete the consolidation worksheet for this business combination.

      

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Expert Solution

ekkarill92 answered 1 year ago
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