PR Company pays $10,000 in cash and issues no-par stock with a fair value of $40,000 to acquire all of SX Corporation's net assets. SX's balance sheet at the date of acquisition is as follows: Corporation Current assets Property, plant & equipment, net Identifiable intangible assets Total assets Current liabilities Long-term debt Capital stock Retained earnings Accumulated other comprehensive income Treasury stock Total liabilities & equity SX Book value Potential contracts with new customers Advanced production technology Future cost savings Customer lists $2,000 10,000 6,000 4,000 14,000 $16,000 $1,600 $2,000 12,000 11,600 5,000 8,000 (1,000) (9,600) $16,000 PR's consultants find these items that are not reported on SX's balance sheet: Fair value Fair value $4,200 $ 8,000 4,000 2,000 1,000 Outside consultants are paid $200 in cash, and registration fees to issue PR's new stock are $400. The question below relates to the entry or entries PR makes to record the acquisition on its books. Three months after the acquisition, a fire damages SX's equipment, reducing its fair value from $6,000 to $4,000. How does PR report this event? Ignore depreciation a. Loss of $2,000, reported on the income statement b. $2,000 increase in goodwill C. Not reported
PR Company pays $10,000 in cash and issues no-par stock with a fair value of $40,000 to acquire all of SX Corporation's net assets. SX's balance sheet at the date of acquisition is as follows: Corporation Current assets Property, plant & equipment, net Identifiable intangible assets Total assets Current liabilities Long-term debt Capital stock Retained earnings Accumulated other comprehensive income Treasury stock Total liabilities & equity SX Book value Potential contracts with new customers Advanced production technology Future cost savings Customer lists $2,000 10,000 6,000 4,000 14,000 $16,000 $1,600 $2,000 12,000 11,600 5,000 8,000 (1,000) (9,600) $16,000 PR's consultants find these items that are not reported on SX's balance sheet: Fair value Fair value $4,200 $ 8,000 4,000 2,000 1,000 Outside consultants are paid $200 in cash, and registration fees to issue PR's new stock are $400. The question below relates to the entry or entries PR makes to record the acquisition on its books. Three months after the acquisition, a fire damages SX's equipment, reducing its fair value from $6,000 to $4,000. How does PR report this event? Ignore depreciation a. Loss of $2,000, reported on the income statement b. $2,000 increase in goodwill C. Not reported
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:PR Company pays $10,000 in cash and issues no-par stock with a fair value of $40,000 to acquire all of SX
Corporation's net assets. SX's balance sheet at the date of acquisition is as follows:
Current assets
Property, plant & equipment, net
Identifiable intangible assets
Total assets
Current liabilities
Long-term debt
Capital stock
Retained earnings
Accumulated other comprehensive
income
Treasury stock
Total liabilities & equity
Potential contracts with new
SX Corporation
Book
value
customers
Advanced production technology
Future cost savings
Customer lists
$ 2,000
10,000
4,000
$16,000
$ 1,600
12,000
5,000
8,000
(1,000)
(9,600)
$16,000
PR's consultants find these items that are not reported on SX's balance sheet:
Fair
value
$ 8,000
4,000
2,000
1,000
Fair
value
$ 4,200
6,000
14,000
$ 2,000
11,600
Outside consultants are paid $200 in cash, and registration fees to issue PR's new stock are $400. The
question below relates to the entry or entries PR makes to record the acquisition on its books.
a. Loss of $2,000, reported on the income statement
b. $2,000 increase in goodwill
C. Not reported
Three months after the acquisition, a fire damages SX's equipment, reducing its fair value from
$6,000 to $4,000. How does PR report this event? Ignore depreciation
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