Question

The following financial statement information is for an investor company and an investee company on January 1, 2013. On January 1, 2013, the investor company's common stock had a traded market value of $10.5 per share, and the investee company's common stock had a traded market value of $19 per share.

	Book Values		Fair Values
	Investor	Investee	Investor	Investee
Receivables & inventories	$60,000	$30,000	$54,000	$27,000
Land	120,000	60,000	180,000	90,000
Property & equipment	135,000	60,000	150,000	78,000
Trademarks & patents	_	_	90,000	48,000
Total assets	$315,000	$150,000	$474,000	$243,000
Liabilities	$90,000	$48,000	$108,000	$57,000
Common stock ($1 par)	18,000	10,000
Additional paid-in capital	162,000	86,000
Retained earnings	45,000	6,000
Total liabilities & equity	$315,000	$150,000
Net assets	$225,000	$102,000	$366,000	$186,000

Asset acquisition (market value is different from book value)
Assume that the investor company issued 18,000 new shares of the investor company's common stock in exchange for all of the individually identifiable assets and liabilities of the investee company, in a transaction that qualifies as a business combination. The financial information presented, above, was prepared immediately before this transaction. Provide the Investor Company's balance (i.e., on the investor's books, before consolidation) for "Goodwill" immediately following the acquisition of the investee's net assets:

Answer 1

1)Asset aqusition by investor

Total purchase considaretion given    18,000shares*10.5=1,89,000

less:Fair value of Net Assets Acquired    (1,86,000)

Goodwill on acquisition    3,000
  

Discharge of Purchase considaretion common stock 18000*1=18000

   Additional paid-in capital 18,000*9.5=1,71,00

​Extract of Balance sheet of Investor Company

Particulars	Book values of investor	Fair value of investee	Total
Receivables & inventories	60,000	27,000	87,000
land	1,20,000	90,000	2,10,000
Property & equipment	1,35,000	78,000	2,13,000
Trademarks & patents		48,000	48,000
Goodwill	---	3,000	3,000
Total assets			5,61,000
Liabilities	90,000	57,000	1,47,000
Common stock ($1 par)	18,000	18,000	36,000
Additional paid-in capital	1,62,000	1,71,000	3,33,000
Retained earnings	45,000	---	45,000
Total liabilities & equity			5,61,000

2)stock aqusition by investor

Total purchase considaretion given 18,000shares*10.5=1,89,000

less:cost of investment in investee stock 18,000shares*19=3,42,000

Capital reserve 1,53,000
  

Discharge of Purchase considaretion common stock 18000*1=18000

   Additional paid-in capital 18,000*9.5=1,71,00

​Extract of Balance sheet of Investor Company

Particulars	Book values of investor	Aquisition made	Total
Receivables & inventories	60,000		60,000
land	1,20,000		1,20,000
Property & equipment	1,35,000		1,35,000
investment in investee		3,42,000	3,42,000
Total assets			6,57,000
Liabilities	90,000	---	90,000
Common stock ($1 par)	18,000	18,000	36,000
Additional paid-in capital	1,62,000	1,71,000	3,33,000
Retained earnings	45,000	---	45,000
+capital reserve		1,53,000	1,53,000
Total liabilities & equity			6,57,000