Question

Petrel Corporation acquires all of the stock of Samson Company for $30 million in cash. Samson’s balance sheet accounts at the date of acquisition are listed below. Date-of-acquisition fair values for Samson’s assets and liabilities are also displayed. Samson has previously unreported developed technology valued at $6 million, meeting the criteria for capitalization per ASC Topic 805.

(in thousands)	Book Value Dr (Cr)	Fair Value Dr (Cr)
Cash	$2,000	$2,000
Accounts receivable	5,000	4,500
Inventories	30,000	15,000
Land, buildings and equipment, net	320,000	100,000
Trademarks	10,000	150,000
Current liabilities	(45,000)	(45,000)
Noncurrent liabilities	(250,000)	(245,000)
Common stock, $2 par	(1,000)
Additional paid-in capital	(80,000)
Retained earnings	5,500
Accumulated other comprehensive income	(500)
Treasury stock	4,000
Total	$0

Required

a. Prepare a schedule calculating the goodwill to be recognized for this acquisition.

Instructions:

When appropriate, use negative signs with your excess of fair value over book value answers (left column only).

Do not use negative signs with your answers in the right column.

Enter answers in thousands.

Acquisition cost			$Answer
Samson’s book value			Answer
Excess of acquisition cost over book value			Answer
Excess of fair value over book value:
Accounts receivable		Answer
Inventories		Answer
Land, buildings and equipment, net		Answer
Trademarks		Answer
Developed technology		Answer
Noncurrent liabilities		Answer	Answer
Goodwill			$Answer

b. Prepare the eliminating entries to consolidate the balance sheets of Petrel and Samson at the date of acquisition.

Enter answers in thousands.

Ref.	Description		Debit	Credit
(E)	Common stock		Answer	Answer
	Additional paid-in capital		Answer	Answer
	AnswerAccounts receivableAOCIGoodwillInvestment in SamsonRetained earningsTreasury stock		Answer	Answer
	AnswerAccounts receivableAOCIGoodwillInvestment in SamsonRetained earningsTrademarks		Answer	Answer
	AnswerAccounts receivableAOCIDeveloped technologyGoodwillInvestment in SamsonTreasury stock		Answer	Answer
	Investment in Samson		Answer	Answer
(R)	Trademarks		Answer	Answer
	Developed technology		Answer	Answer
	Noncurrent liabilities		Answer	Answer
	AnswerAccounts receivableAOCIGoodwillNoncurrent liabilitiesRetained earningsTreasury stock		Answer	Answer
	AnswerAccounts receivableAOCIGoodwillInvestment in SamsonRetained earningsTreasury stock		Answer	Answer
	AnswerAccounts receivableAOCIGoodwillInvestment in SamsonRetained earningsTreasury stock		Answer	Answer
	Inventories		Answer	Answer
	Land, buildings and equipment, net		Answer	Answer

Answer 1

	Acquisition cost			30,000
	Samson’s book value			(72,000)	=-1000-80000+5500-500+4000
	Excess of acquisition cost over book value			(42,000)
	Excess of fair value over book value:
	Accounts receivable		(500)
	Inventories		(15,000)
	Land, buildings and equipment, net		(220,000)
	Trademarks		140,000
	Developed technology		6,000
	Noncurrent liabilities		5,000	84,500
	Goodwill			42,500
	Ref.	Description		Debit	Credit
	(E)	Common stock		1000
		Additional paid-in capital		80000
		Retained earnings			5500
		AOCI		500
		Treasury stock			4000
		Investment in Samson			72000	balancing figure
	(R)	Trademarks		140000
		Developed technology		6000
		Noncurrent liabilities		5000
		Accounts receivable			500
		Goodwill		42500
		Investment in Samson		42000
		Inventories			15000
		Land, buildings and equipment, net			220000