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 $850,000 for Oxford, which has the following accounts: Таx Basis $ 153,000 141,000 136,000 221,000 160,000 (281,000) Fair Value $ 153,000 141,000 136,000 276,000 233,000 (281,000) Accounts receivable Inventory Land Buildings Equipment Liabilities 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 $850,000 for Oxford, which has the following accounts: Таx Basis $ 153,000 141,000 136,000 221,000 160,000 (281,000) Fair Value $ 153,000 141,000 136,000 276,000 233,000 (281,000) Accounts receivable Inventory Land Buildings Equipment Liabilities 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.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Consolidation

Consolidation in general examination implies an asset oscillating between well-defined methods of trading status. Consolidation is commonly known as market indecisiveness, which completes when the asset's values move forward or backward the trading structure.

Question

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 $850,000 for Oxford, which has the following accounts:
Fair Value
Tax Basis
$ 153,000
141,000
136,000
276,000
233,000
(281,000)
$ 153,000
141,000
136,000
221,000
160,000
(281,000)
Accounts receivable
Inventory
Land
Buildings
Equipment
Liabilities
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.

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