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 Accounts Receivable $153000 $153000 Inventory 141000 141000 Land 136000 136000 Buildings 276000 221000 Equipment 233000 160000 Liabilities (281000) (281000) 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 40 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: Fair value Tax Basis Accounts Receivable $153000 $153000 Inventory 141000 141000 Land 136000 136000 Buildings 276000 221000 Equipment 233000 160000 Liabilities (281000) (281000) 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 40 percent effective tax rate.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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 | |
| $153000 | $153000 | |
| Inventory | 141000 | 141000 |
| Land | 136000 | 136000 |
| Buildings | 276000 | 221000 |
| Equipment | 233000 | 160000 |
| Liabilities | (281000) | (281000) |
a. What amount of
b. What amounts will be used to consolidate Oxford with King’s Road at the date of acquisition?
c. On a consolidated
should King’s Road recognize? Assume a 40 percent effective tax rate.
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