In: Accounting
Williams Roberts
Cash 160,000 50,000
Inventory 550,000 160,000
Equipment 1,500,000 670,000
Totals 2,210,000 880,000
Totals Liabilities 740,000 280,000
c/s $20 par 600,000 300,000
other contr cap 375,000 105,000
retained earnings 495,000 195,000
totals 2,210,000 880,000
inventory has a FMV of 170,000 for Roberts and the equipment has a FMV of 715,000. The book value and FMV of liabilities are the same. Assuming Williams wishes to acquire Roberts for cash in an asset acquisition, determine the following cutoff amounts:
ROBERTS ASSETS NET MARKET VALUE: | ||||||||||
AMOUNT | ||||||||||
Assets: | ||||||||||
Cash | 50000 | |||||||||
Inv. | 170000 | |||||||||
Equip | 715000 | |||||||||
Less:Liabilities | -280000 | |||||||||
Net Assets Market Value | 655000 | |||||||||
Req 1) Purchse price above which Williams would record goodwill = B/V of assets - Liabilities = 880000-280000= 600000 | ||||||||||
Req 2) Purchse price which Williams would record a 60000 gain = (B/V of assets - Liabilities)-60000 = 880000-280000-60000= 540000 | ||||||||||
Req 3) Purchse price below which Williams would obtain a bargain = Net Assets Market Value = 655000 | ||||||||||
Req 4) Purchse price which Williams would record 85000 of goodwill = (B/V of assets - Liabilities) + 85000= 880000-280000 + 85000= 685000 |