King's Road recently acquired all of Oxford Corporation's stock and is now consolidating the financial data of this new subsidiary. King's Road paid a total of $940,000 for Oxford, which has the following accounts: Items Accounts receivable. Inventory Land Buildings Equipment Liabilities Fair Value $ 112,000 209,000 108,000 208,500 294,000 (243,000) Tax Basis $ 112,000 209,000 108,000 155,000 232,000 (243,000) Required: a. What amount of deferred tax liability arises in the acquisition? b. What amounts will be used to consolidate Oxford with King's Road at the date of acquisition? c. On a consolidated balance sheet prepared immediately after this takeover, how much goodwill should King's Road recognize? Assume a 21 percent effective tax rate.
King's Road recently acquired all of Oxford Corporation's stock and is now consolidating the financial data of this new subsidiary. King's Road paid a total of $940,000 for Oxford, which has the following accounts: Items Accounts receivable. Inventory Land Buildings Equipment Liabilities Fair Value $ 112,000 209,000 108,000 208,500 294,000 (243,000) Tax Basis $ 112,000 209,000 108,000 155,000 232,000 (243,000) Required: a. What amount of deferred tax liability arises in the acquisition? b. What amounts will be used to consolidate Oxford with King's Road at the date of acquisition? c. On a consolidated balance sheet prepared immediately after this takeover, how much goodwill should King's Road recognize? Assume a 21 percent effective tax rate.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:King's Road recently acquired all of Oxford Corporation's stock and is now consolidating the financial data of this new subsidiary.
King's Road paid a total of $940,000 for Oxford, which has the following accounts:
Items
Accounts receivable.
Inventory
Land
Buildings
Equipment
Liabilities
Fair Value
$ 112,000
209,000
108,000
208,500
294,000
(243,000)
Required A
Required:
a. What amount of deferred tax liability arises in the acquisition?
b. What amounts will be used to consolidate Oxford with King's Road at the date of acquisition?
c. On a consolidated balance sheet prepared immediately after this takeover, how much goodwill should King's Road recognize?
Assume a 21 percent effective tax rate.
Required B
Tax Basis
$ 112,000
209,000
108,000
155,000
Complete this question by entering your answers in the tabs below.
232,000
(243,000)
Required C
What amount of deferred tax liability arises in the acquisition?
Deferred tax liability
Required A
Required B >
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