Consider the following information from Alliance Data Systems Corporation 2009 10K.On October 30, 2009, the Company assumed the operations of the Charming Shoppes’ credit card program, including the service center operations associated with Charming Shoppes’ branded card progams, portfolio and securitization master trust. The transaction consisted of purchasing existing accounts and the rights to new accounts along with certain other assets that are required to support the securitization program including retained certificates and interests, cash collateral accounts, and an interest-only strip, totaling a combined $158.9 million. The Company obtained control of the assets and assumed the liabilities on October 30, 2009, the acquisition date. The reults of operations for this acquisition have been included since the date of acquisition and are reflected in the Private Label Services and Private Label Credit segments.The Company engaged a third-party specialist to assist it in the measurement of the fair value of the assets required. The fair value of the assets acquired exceeded the cost of the acquisition. Consequently, the Company reassessed the recognition and measurement of the identifiable assets acquired and liabilities assumed and concluded that the valuation procedures and resulting measures were appropriate. The excess value of the net assets acquired over the purchase price has been recorded as a bargain purchase gain, which is included in gain on acquisition of a business in the Company’s consolidated statements of income. The following table summarizes the fair values of the assets acquired and liabilities assumed in the Charming Shoppes’ acquisition as of the date of purchase. As of October 30, 2009 (in thousands)Current assets $ 24,910Property, plant and equipment 491Due from securitization 108,554Identifiable intangible assets 67,200 Total assets acquired 201,155Current Liabilities 8,500Deferred tax liability 12,527 Total liabilities assumed 21,027Net assets acquired $ 180,128Total consideration paid 158,901 Gain on business combination $ 21,227Assuming the acquisition is an asset acquisition treated as a business combination, prepare the journal entry on the acquirer’s books to record the acquisition. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)Account Titles and ExplanationDebitCredit Cash Current Assets Current Liabilities Deferred Taxes Due from Securitization Gain on Bargain Purchase Identifiable Intangible Assets No Entry Property, Plant and Equipment Cash Current Assets Current Liabilities Deferred Taxes Due from Securitization Gain on Bargain Purchase Identifiable Intangible Assets No Entry Property, Plant and Equipment Cash Current Assets Current Liabilities Deferred Taxes Due from Securitization Gain on Bargain Purchase Identifiable Intangible Assets No Entry Property, Plant and Equipment Cash Current Assets Current Liabilities Deferred Taxes Due from Securitization Gain on Bargain Purchase Identifiable Intangible Assets No Entry Property, Plant and Equipment Cash Current Assets Current Liabilities Deferred Taxes Due from Securitization Gain on Bargain Purchase Identifiable Intangible Assets No Entry Property, Plant and Equipment Cash Current Assets Current Liabilities Deferred Taxes Due from Securitization Gain on Bargain Purchase Identifiable Intangible Assets No Entry Property, Plant and Equipment Cash Current Assets Current Liabilities Deferred Taxes Due from Securitization Gain on Bargain Purchase Identifiable Intangible Assets No Entry Property, Plant and Equipment Cash Current Assets Current Liabilities Deferred Taxes Due from Securitization Gain on Bargain Purchase Identifiable Intangible Assets No Entry Property, Plant and Equipment

Given: Net assets acquired $180,128 Total consideration paid $158,901 Gain on business…

Answered: Assuming the acquisition is an asset…

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter12: Intangibles

Section: Chapter Questions

Problem 11P

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Consider the following information from Alliance Data Systems Corporation 2009 10K.

On October 30, 2009, the Company assumed the operations of the Charming Shoppes’ credit card program, including the service center operations associated with Charming Shoppes’ branded card progams, portfolio and securitization master trust. The transaction consisted of purchasing existing accounts and the rights to new accounts along with certain other assets that are required to support the securitization program including retained certificates and interests, cash collateral accounts, and an interest-only strip, totaling a combined $158.9 million. The Company obtained control of the assets and assumed the liabilities on October 30, 2009, the acquisition date. The reults of operations for this acquisition have been included since the date of acquisition and are reflected in the Private Label Services and Private Label Credit segments.

The Company engaged a third-party specialist to assist it in the measurement of the fair value of the assets required. The fair value of the assets acquired exceeded the cost of the acquisition. Consequently, the Company reassessed the recognition and measurement of the identifiable assets acquired and liabilities assumed and concluded that the valuation procedures and resulting measures were appropriate. The excess value of the net assets acquired over the purchase price has been recorded as a bargain purchase gain, which is included in gain on acquisition of a business in the Company’s consolidated statements of income. The following table summarizes the fair values of the assets acquired and liabilities assumed in the Charming Shoppes’ acquisition as of the date of purchase.

		*As of October 30, 2009 (in thousands)*
Current assets		$ 24,910
Property, plant and equipment		491
Due from securitization		108,554
Identifiable intangible assets		67,200
Total assets acquired		201,155
Current Liabilities		8,500
Deferred tax liability		12,527
Total liabilities assumed		21,027
Net assets acquired		$ 180,128
Total consideration paid		158,901
Gain on business combination		$ 21,227

Assuming the acquisition is an asset acquisition treated as a business combination, prepare the journal entry on the acquirer’s books to record the acquisition. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

Account Titles and Explanation	Debit	Credit
Cash Current Assets Current Liabilities Deferred Taxes Due from Securitization Gain on Bargain Purchase Identifiable Intangible Assets No Entry Property, Plant and Equipment
Cash Current Assets Current Liabilities Deferred Taxes Due from Securitization Gain on Bargain Purchase Identifiable Intangible Assets No Entry Property, Plant and Equipment
Cash Current Assets Current Liabilities Deferred Taxes Due from Securitization Gain on Bargain Purchase Identifiable Intangible Assets No Entry Property, Plant and Equipment
Cash Current Assets Current Liabilities Deferred Taxes Due from Securitization Gain on Bargain Purchase Identifiable Intangible Assets No Entry Property, Plant and Equipment
Cash Current Assets Current Liabilities Deferred Taxes Due from Securitization Gain on Bargain Purchase Identifiable Intangible Assets No Entry Property, Plant and Equipment
Cash Current Assets Current Liabilities Deferred Taxes Due from Securitization Gain on Bargain Purchase Identifiable Intangible Assets No Entry Property, Plant and Equipment
Cash Current Assets Current Liabilities Deferred Taxes Due from Securitization Gain on Bargain Purchase Identifiable Intangible Assets No Entry Property, Plant and Equipment
Cash Current Assets Current Liabilities Deferred Taxes Due from Securitization Gain on Bargain Purchase Identifiable Intangible Assets No Entry Property, Plant and Equipment

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