On March 31, 2016, Wolfson Corporation acquired all of the outstanding common stock of Barney Corporation for $17,000,000 in cash. The book values and fair values of Barney's assets and liabilities were as follows: Current assets Book Value Fair Value $6,000,000 $7,500,000 Property, plant, and equipment $11,000,000 $14,000,000 Other assets $1,000,000 $1,500,000 Current liabilities $4,000,000 $4,000,000 Long-term liabilities $6,000,000 $5,500,000 Calculate the amount paid for goodwill.

On March 31, 2016, Wolfson Corporation acquired all of the outstanding common stock of Barney Corporation for $17,000,000 in cash. The book values and fair values of Barney's assets and liabilities were as follows: Current assets Book Value Fair Value $6,000,000 $7,500,000 Property, plant, and equipment $11,000,000 $14,000,000 Other assets $1,000,000 $1,500,000 Current liabilities $4,000,000 $4,000,000 Long-term liabilities $6,000,000 $5,500,000 Calculate the amount paid for goodwill.

Auditing: A Risk Based-Approach to Conducting a Quality Audit

10th Edition

ISBN:9781305080577

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter16: Advanced Topics Concerning Complex Auditing Judgments

Section: Chapter Questions

Problem 55RSCQ

See similar textbooks

Similar questions

On March 31, 2016, Wolfson Corporation acquired all of the outstanding common stock of Barney Corporation for $17,000,000 in cash. The book values and fair values of Barney's assets and liabilities were as follows: Fair Value Book Value $ 6,000,000 $ 7,500,000 Current assets Property, plant, and equipment Other assets Current liabilities 11,000,000 1,000,000 4,000,000 6,000,000 14,000,000 1,500,000 4,000,000 5,500,000 Long-term liabilities Required: Calculate the amount paid for goodwill.
On May 31, 2018, Armstrong Company paid $3,500,000 to acquire all of the common stock of Hall Corporation, which became a division of Armstrong. Hall reported the following balance sheet at the time of the acquisition: Current assets $ 900,000 Current liabilities $ 600,000 Noncurrent assets 2,700,000 Long-term liabilities 500,000 Stockholders' equity 2,500,000 Total liabilities and Total assets $3,600,000 stockholders' equity $3,600,000 It was determined at the date of the purchase that the fair value of the identifiable net assets of Hall was $3,100,000. At December 31, 2018, Hall reports the following balance sheet information: Current assets $ 800,000 Noncurrent assets (including goodwill recognized in purchase) 2,600,000 Current liabilities (700,000) Long-term liabilities (500,000) Net assets $2,200,000 It is determined that the fair value of the Hall division is $2,300,000. Instructions (a) Compute the amount of goodwill recognized, if any, on May 31, 2018. (b) Determine the…
On May 31, 2018, Armstrong Company paid $3,500,000 to acquire all of the common stock of Hall Corporation, which became a division of Armstrong. Hall reported the following balance sheet at the time of the acquisition: Current assets $ 900,000 Current liabilities $ 600,000 Noncurrent assets 2,700,000 Long-term liabilities 500,000 Stockholders’ equity 2,500,000 Total liabilities and Total assets $3,600,000 stockholders’ equity $3,600,000 It was determined at the date of the purchase that the fair value of the identifiable net assets of Hall was $3,100,000. At December 31, 2018, Hall reports the following…
Pritano Company acquired all the net assets of Succo Company on December 31, 2013, for $2,145,600 cash. The balance sheet of Succo Company immediately prior to the acquisition showed: Book value Fair value Current assets $ 995,110 $995,110 Plant and equipment 979,390 1,375,740 Total $1,974,500 $2,370,850 Liabilities $187,040 $235,560 Common stock 524,720 Other contributed capital 588,400 Retained earnings 674,340 Total $1,974,500 As part of the negotiations, Pritano Company agreed to issue 9,230 additional shares of its $10 par value common stock to the stockholders of Succo if the average postcombination earnings over the next three years equaled or exceeded $2,481,300. The fair value of the contingent consideration on the date of acquisition was estimated to be $219,700. The contingent consideration (earnout) was classified as equity rather than as a liability.…
Pritano Company acquired all the net assets of Succo Company on December 31, 2013, for $2,234,440 cash. The balance sheet of Succo Company immediately prior to the acquisition showed: Book value Fair value Current assets $ 962,320 $962,320 Plant and equipment 1,186,440 1,337,450 Total $2,148,760 $2,299,770 Liabilities $191,390 $214,050 Common stock 471,160 Other contributed capital 584,100 Retained earnings 902,110 Total $2,148,760 As part of the negotiations, Pritano agreed to pay the stockholders of Succo $385,210 cash if the post-combination earnings of Pritano averaged $2,234,440 or more per year over the next two years. The estimated fair value of the contingent consideration was $148,740 on the date of the acquisition. (a) Prepare the journal entry on the books of Pritano to record the acquisition on December 31, 2013. (If no entry is required, select…
On January 1, 2016, Pilsner Company acquired an 80% interest in Smalley Company for $3,600,000. On that date, Smalley Company had retained earnings of $800,000 and common stock of $2,800,000. The book values of assets and liabilities were equal to fair values except for the following: Book Value Fair Value Inventory $ 50,000 $ 85,000 Equipment (net) 540,000 720,000 Land 300,000 660,000 The equipment had an estimated remaining useful life of 8 years. One-half of the inventory was sold in 2016 and the remaining half was sold in 2017. Smalley Company reported net income of $240,000 in 2016 and $300,000 in 2017. No dividends were declared or paid in either year. Pilsner Company uses the cost method to record its investment in Smalley Company. Required: Prepare, in general journal form, the workpaper eliminating entries necessary in the consolidated statements workpaper for the year ending December 31, 2017.
Adams Corporation acquired 90 percent of the outstanding voting shares of Barstow, Inc., on December 31, 2016. Adams paid a total of $603,000 in cash for these shares. The 10 percent noncontrolling interest shares traded on a daily basis at fair value of $67,000 both before and after Adams’s acquisition. On December 31, 2016, Barstow had the following account balances: Book Value Fair Value Current assets $ 160,000 $ 160,000 Land 120,000 150,000 Buildings (10-year remaining life) 220,000 200,000 Equipment (5-year remaining life) 160,000 200,000 Patents (10-year remaining life) 0 50,000 Notes payable (due in 5 years) (200,000 ) (180,000 ) Common stock (180,000 ) Retained earnings, 12/31/16 (280,000 ) December 31, 2018, adjusted trial balances for the two companies follow: AdamsCorporation Barstow,Inc. Debits Current assets $ 610,000 $ 250,000 Land…
Pop Corporation acquired 70 percent of the outstanding common stock of Son Corporation on January 1,2016, for $350,000 cash. Immediately after this acquisition the balance sheet information for the twocompanies was as follows (in thousands) :
On May 31, 2011, Armstrong Company paid P3,500,000 to acquire all of the common stock of Hall Corporation, which became a division of Armstrong. Hall reported the following balance sheet at the time of the acquisition: Current assets P900,000 Current liabilities P600,000 Noncurrent assets 2,700,000 Long-term liabilities 500,000 Stockholders’ equity 2,500,000 Total liabilities and Total assets P3,600,000 stockholders’ equity P3,600,000 It was determined at the date of the purchase that the fair value of the identifiable net assets of Hall was P2,800,000. At December 31, 2011, Hall reports the following balance sheet information: Current assets P800,000 Noncurrent assets (including goodwill…
Nascent, Inc., acquires 60 percent of Sea-Breeze Corporation for $414,000 cash on January 1, 2015. The remaining 40 percent of the Sea-Breeze shares traded near a total value of $276,000 both before and after the acquisition date. On January 1, 2015, Sea-Breeze had the following assets and liabilities:The companies’ financial statements for the year ending December 31, 2018, follow:Answer the following questions:a. How can the accountant determine that the parent has applied the initial value method?b. What is the annual excess amortization initially recognized in connection with this acquisition?c. If the parent had applied the equity method, what investment income would the parent have recorded in 2018?d. What amount should the parent report as retained earnings in its January 1, 2018, consolidated balance sheet?e. What is consolidated net income for 2018 and what amounts are attributable to the controlling and noncontrolling interests?f. Within consolidated statements at January 1,…
Peer, Inc. acquires 75 percent of Sea-breeze Corporation for P600,000 cash on January 1, 2016. The remaining percent of the Sea-breeze shares traded near a total value of 200,000 both before and after the acquisition date. NCI is measured on a full basis .On January 1, 2016, Sea-breeze had the following assets and liabilities: Book Value Fair Value Current Assets P 250,000 P 250,000 Land 100,000 100,000 Building (net) – 5-year-year life 400,000 350,000 Equipment (net) – 8-year life 300,000 400,000 Patent (10-year life) -0- 50,000 Accounts Payable (200,000) (200,000) Bonds Payable – 5-years (150,000) (175,000) Net P 700,000 P 775,000 Common Stock P 650,000 Retained Earnings P 50,000 The companies’ financial statements for the year ending December 31, 2016 using cost method are as follows: Peer Sea-Breeze Revenue P (800,000) P (250,000) Operating expenses…
Pritano Company acquired all the net assets of Succo Company on December 31, 2013, for $2,185,400 cash. The balance sheet of Succo Company immediately prior to the acquisition showed: Book value Fair value Current assets $ 871,440 $871,440 Plant and equipment 1,025,090 1,437,590 Total $1,896,530 $2,309,030 Liabilities $194,060 $207,670 Common stock 484,800 Other contributed capital 632,900 Retained earnings 584,770 Total $1,896,530 As part of the negotiations, Pritano agreed to pay the stockholders of Succo $356,690 cash if the post-combination earnings of Pritano averaged $2,185,400 or more per year over the next two years. The estimated fair value of the contingent consideration was $143,480 on the date of the acquisition. (a) Prepare the journal entry on the books of Pritano to record the acquisition on December 31, 2013. (If no entry is required, select…