King's Road recently acquired all of Oxford Corporation's stock and is now consolidating the financial data of thisnew subsidiary. King's Road paid a total of $895,000 for Oxford, which has the following accounts:Fair Value$ 183,000142,000104,000Tax Basis$ 183,000142,000104,000Accounts receivableInventoryLandBuildingsEquipment234,000235,000(245,000)190,000184,000(245,000)LiabilitiesRequired: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'sRoad recognize? Assume a 21 percent effective tax rate.

When Profit calculated as per the Tax basis is lower than the profit calculated as per the…

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 $895,000 for Oxford, which has the following accounts: Fair Value Tax Basis $ 183,000 142,000 104,000 234,000 235,000 (245,000) $ 183,000 142,000 104,000 190,000 Accounts receivable Inventory Land Buildings Equipment 184,000 (245,000) Liabilities 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 $895,000 for Oxford, which has the following accounts: Fair Value Tax Basis $ 183,000 142,000 104,000 234,000 235,000 (245,000) $ 183,000 142,000 104,000 190,000 Accounts receivable Inventory Land Buildings Equipment 184,000 (245,000) Liabilities 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.

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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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 $895,000 for Oxford, which has the following accounts:
Fair Value
$ 183,000
142,000
104,000
Tax Basis
$ 183,000
142,000
104,000
Accounts receivable
Inventory
Land
Buildings
Equipment
234,000
235,000
(245,000)
190,000
184,000
(245,000)
Liabilities
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.

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Required (a) : Deferred Tax Liability arises on acquisition

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Required (c) : Goodwill Calculation

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