Assume that Pauly D Company obtains all of the outstanding common stock of Snooki Company on January 1, 2020. Pauly D acquires this stock for $1,000,000 in cash. The book values as well as the appraised fair values of Snooki's accounts follow: Book Values 1/1/20 Fair Values 1/1/20 Difference Current Assets 350,000 350,000 - Trademarks (indefinite life) 240,000 260,000 20,000 Patented technology (10 yr remaining life) 310,000 450,000 140,000 Equipment (5 year remaining life) 190,000 140,000 (50,000) Liabilities (400,000) (400,000) - Net book value $690,000 $800,000 $110,000 Common Stock $40 par value (270,000) Additional paid-in-capital (20,000) Retained earnings, 1/1/20 (400,000) Pauly D considers the economic life of Snooki's trademarks as having an indefinite life. For definite lived assets acquired in the combination, we assume straight-line amortization and depreciation with no salvage value. Step 1:Perform an Allocation of Purchase Price and identify if Pauly D should recognize Goodwill or a Gain on Bargain Purchase
Assume that Pauly D Company obtains all of the outstanding common stock of Snooki Company on January 1, 2020. Pauly D acquires this stock for $1,000,000 in cash.
The book values as well as the appraised fair values of Snooki's accounts follow:
Book Values 1/1/20 Fair Values 1/1/20 Difference
Current Assets 350,000 350,000 -
Trademarks (indefinite life) 240,000 260,000 20,000
Patented technology (10 yr remaining life) 310,000 450,000 140,000
Equipment (5 year remaining life) 190,000 140,000 (50,000)
Liabilities (400,000) (400,000) -
Net book value $690,000 $800,000 $110,000
Common Stock $40 par value (270,000)
Additional paid-in-capital (20,000)
Pauly D considers the economic life of Snooki's trademarks as having an indefinite life. For definite lived assets acquired in the combination, we assume straight-line amortization and
Step 1:Perform an Allocation of Purchase Price and identify if Pauly D should recognize
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