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 $1,060,000 for Oxford, which has the following accounts: Fair Value $ 139,000 228,000 103,000 295,750 298,750 (248,000) Tax Basis $ 139,000 228,000 103,000 239,000 248,000 (248,000) Accounts receivable Inventory Land Buildings Equipment 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 $1,060,000 for Oxford, which has the following accounts: Fair Value $ 139,000 228,000 103,000 295,750 298,750 (248,000) Tax Basis $ 139,000 228,000 103,000 239,000 248,000 (248,000) Accounts receivable Inventory Land Buildings Equipment 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 $1,060,000 for Oxford, which has the following accounts:
Fair Value
Таx Basis
$ 139,000
228,000
103,000
295,750
298,750
(248,000)
$ 139,000
228,000
103,000
239,000
248,000
(248,000)
Accounts receivable
Inventory
Land
Buildings
Equipment
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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