Chapter 2, Problem 65P

a.

To determine

Mention the procedure under GAAP for companies to use provisional amounts and the

process by which estimation will be adjusted.

Explanation of Solution

An acquisition of assets is the purchase of a corporation by purchasing its assets rather than its stock. An acquisition is when one company acquires most or all of the shares of another company to gain control over that company. An investment in equity is money which is invested in a company by buying that company's shares in the stock market. Typically, those shares are traded in a stock exchange.

A business is an incorporated set of operations and assets that are able to conduct and maintaining directly to investors or other owners, members or participants in order to provide a yield in the form of dividends, lower costs or other economic advantages. A business combination is defined as a transaction or other event where an acquirer (an investor entity) gains control of one or more companies.

An investment in equity is money which is invested in a company by buying that company's shares in the stock market. Typically, those shares are traded on a stock exchange.

It is not unusual for the accounting to take a few other hours to fulfill because of the challenges inherent in the business combinations. FASB ASC 805-10-25-13 through 25-19 allows businesses to use "provisional" amounts and to alter those amounts prospectively when better knowledge is accessible, provided the final measurement of all assets and liabilities is finished within one year from the date of acquisition. The investor may also realize additional assets or liabilities during the measurement period if new data is acquired on the facts of the case that emerged at the date of acquisition which, if known, would have resulted in the acknowledgement of those assets and liabilities at that date. The adjustments are recognized retroactively (i.e., no longer retroactively) starting in 2015, with the exponential adjustment fully recognized during the period in which the measurement was changed.

b.

To determine

Prepare the journal entry made by the. Corporation, SG for the acquisition of the common

stock of the Incorporation, BT.

Explanation of Solution

An acquisition of assets is the purchase of a corporation by purchasing its assets rather than its stock. An acquisition is when one company acquires most or all of the shares of another company to gain control over that company. An investment in equity is money which is invested in a company by buying that company's shares in the stock market. Typically, those shares are traded in a stock exchange.

An acquisition of assets is the purchase of a corporation by purchasing its assets rather than its stock.

The required journal entry is as follows:

Date	Accounting Explanation	Amount ($)	Amount ($)
	Equity investment	$\$3200.5$
	SG & A Expenses	$\$76.6$
	Cash		$\$3,277.1$
	(To record the acquisition of the common stock of the Incorporation, BT in  millions dollar)

The purchase price of $5.100.0 included in the first sentence of the footnote assumes that Corporation, SG issued the debt held by Incorporation, BT because the debt was refinanced as part of the acquisition. Debt refinancing in business combinations is not uncommon, but ASC 805 precludes assumption or refinancing of the acquired debt to be included in the purchase price. Therefore, refinanced debt (i.e. $5,100 − $1,899.5  = $3,200.5) is included in the $3,200.5 investment account.

c.

To determine

Mention the process by which the Corporation, SG will determine the assignment of fair value of goodwill amount to $2,956.1 million.

Explanation of Solution

An acquisition of assets is the purchase of a corporation by purchasing its assets rather than its stock. An acquisition is when one company acquires most or all of the shares of another company to gain control over that company. An investment in equity is money which is invested in a company by buying that company's shares in the stock market. Typically, those shares are traded in a stock exchange.

An acquisition of assets is the purchase of a corporation by purchasing its assets rather than its stock.

Goodwill is an intangible asset associated with one company being purchased from another. In particular, goodwill is the portion of the purchase price which is higher than the sum of the net fair value of all the assets purchased during the acquisition and the liabilities assumed during the acquisition process. If the acquired assets are not a business, then as an asset acquisition, the reporting entity shall account for the transaction or other event. The amount assigned to Goodwill is not directly calculated. Rather it is calculated as a residual amount (i.e., the amount left over after all other assets and liabilities were identified and valued).

d.

To determine

Mention the amount that will be assigned by the Corporation, SG to amortizable

intangible assets and also state the valuation approaches in determining the fair values of

the individual intangible assets.

Explanation of Solution

An acquisition of assets is the purchase of a corporation by purchasing its assets rather than its stock. An acquisition is when one company acquires most or all of the shares of another company to gain control over that company. An investment in equity is money which is invested in a company by buying that company's shares in the stock market. Typically, those shares are traded in a stock exchange.

An acquisition of assets is the purchase of a corporation by purchasing its assets rather than its stock.

An intangible asset is an asset of a nature not physical. All intangible assets are goodwill, brand recognition, and intellectual property, such as patents, trademarks, and copyrights. There are immaterial assets as opposed to tangible assets, including land, vehicles, equipment and inventories.

Corporation, SG allocated a total fair value of $1,575.3 million (i.e. $1,800.3-$ 225.0) to amortizable intangible assets. FASB ASC 805-20-30-1 requires that, as of the date of acquisition, 'the acquirer shall measure the acquired identifiable assets, the assumed liabilities and any non-controlling interests. in the acquiree at their acquisition-date fair values,” and FASB ASC 820-10-20 classifies fair value as "the price earned for the sale of an asset or payable for the transfer of liability in an organized exchange on the date of measurement." Companies can approximate these fair values through a "market approach," a "income approach," or a "cost approach." Significant estimates are required for each approach. Using the royalty saving method, which is a risk-adjusted discounted cash flow approach, the estimated fair values of acquired finite and indefinite-lived trade names and finite-lived internally developed intellectual property ("IP") have been determined. Finite-lived intangible assets valued using the royalty savings method include gaming content and operating system software, casino management systems and game server software (all included in the software above), certain product trade names and game cabinet design IP (included in the core technology and content above). The royalty saving method values an intangible asset by estimating the saved royalties by owning the asset on the date of acquisition. The royalty saving method requires classifying future revenue that would be affected by the trade name or IP asset (or royalty-free rights to the assets), multiplying it by a royalty rate deemed to be avoided by owning the asset and discounting the projected royalty savings amounts back to the date of acquisition. The royalty rate used in such valuation was based on market rates for similar asset classifications being considered. The estimated fair values of the acquired PTG IP and Utility products IP (both included in core technology and content above) and customer relationships were determined using the method of excess earnings, which is a risk-adjusted discounted cash flow approach that determines the value of an intangible asset as the present value of the cash flows attributable to such asset after excluding the proportion of the cash flows that are attributable to other assets.

The contribution made by other assets to the cash flows-such as fixed assets, working capital, labor force and other intangible assets, including trade names and game content and design IP-was estimated through contributory capital charges. The value of the acquired customer relationship asset is the current value of the attributed post-tax cash flows, net of the fair value return attributed to the other assets after tax.

e.

To determine

Calculate the amount that will be amortized by the Corporation, SG for the acquired

intangible assets during the year ending December 31, 2015 of the Incorporation, BT.

Explanation of Solution

An acquisition of assets is the purchase of a corporation by purchasing its assets rather than its stock. An acquisition is when one company acquires most or all of the shares of another company to gain control over that company. An investment in equity is money which is invested in a company by buying that company's shares in the stock market. Typically, those shares are traded in a stock exchange.

An acquisition of assets is the purchase of a corporation by purchasing its assets rather than its stock.

An intangible asset is an asset of a nature not physical. All intangible assets are goodwill, brand recognition, and intellectual property, such as patents, trademarks, and copyrights. There are immaterial assets as opposed to tangible assets, including land, vehicles, equipment and inventories.

	FV	Life	Amort
Trade names	225.0	Indefinite
Brand names	90.7	9.20	$     9.9
Core technology and content	734.7	7.20	102.0
Customer relationships	726.0	15.10	48.1
Long-term licenses	23.9	3.00	8.0
Total Amortization			$168.0

f.

To determine

Mention the time span for which the Incorporation, BT’s performance will be included in

the revenues and expenses for the year ended December 31, 2014 of the Corporation, SG

and also give the amount contributed by the Incorporation, BT in it.

Explanation of Solution

An acquisition of assets is the purchase of a corporation by purchasing its assets rather than its stock. An acquisition is when one company acquires most or all of the shares of another company to gain control over that company. An investment in equity is money which is invested in a company by buying that company's shares in the stock market. Typically, those shares are traded in a stock exchange.

An acquisition of assets is the purchase of a corporation by purchasing its assets rather than its stock.

A business is an incorporated set of operations and assets that are able to conduct and maintaining directly to investors or other owners, members or participants in order to provide a yield in the form of dividends, lower costs or other economic advantages. A business combination is defined as a transaction or other event where an acquirer (an investor entity) gains control of one or more companies.

Incorporation, BT 's performance is included in the revenues and expenses of

Corporation, SG for the period after the date of acquisition on November 21, 2014.

revenues and losses for the period 21 November 2014 to 31 December 2014 are as

follows, according to the disclosure:

	From November21, 2014 through December 31, 2014
Revenue	$	151.6
Loss from continuing operations	$	(21.1)

g.

To determine

Mention the Incorporation, BT’s approximate revenue for the full year ended Dec 31, 2014 assuming no intercompany transactions.

Explanation of Solution

An acquisition of assets is the purchase of a corporation by purchasing its assets rather than its stock. An acquisition is when one company acquires most or all of the shares of another company to gain control over that company. An investment in equity is money which is invested in a company by buying that company's shares in the stock market. Typically, those shares are traded in a stock exchange.

An acquisition of assets is the purchase of a corporation by purchasing its assets rather than its stock.

A business is an incorporated set of operations and assets that are able to conduct and maintaining directly to investors or other owners, members or participants in order to provide a yield in the form of dividends, lower costs or other economic advantages. A business combination is defined as a transaction or other event where an acquirer (an investor entity) gains control of one or more companies.

Corporation SG states that "Revenue from Consolidated Statements of Operations" is

$1,786.4, assuming no intercompany transactions. This amount comprises Incorporation,

BT’s $151.6 revenues from November 21, 2014 through December 31, 2014. In that

same disclosure, Corporation, SG also provides unaudited consolidated pro-forma

revenue "as if" Incorporation, BT was included for the whole year in the Corporation, SG

 income statement.

As part of that disclosure, Corporation, SG also reports that for the period January 1,

2014 to November 20, 2014, Incorporation, BT had $1,159.5 of revenue. Incorporation,

BT's revenue would thus have been around $1,311.1 (i.e. $1,159.5 + $151.6) for the

twelve months ending December 31, 2014.

h.

To determine

Mention the entry that the Corporation, SG will make in the consolidation process to remove the equity investment account from the parent company balance sheet in the preparation of the consolidated balance sheet.

Explanation of Solution

Consolidation is about combining two or more entities' assets, liabilities, and other

financial items into one. The concept of consolidation in the context of financial

accounting often refers to the consolidation of financial statements in which all

subsidiaries report under the umbrella of a parent company.

An investment in equity is money which is invested in a company by buying that company's shares in the stock market. Typically, those shares are traded on a stock exchange.

Consolidated accounting is used to club a parent company's financial information and one or more subsidiaries. The parent prepares consolidated financial statements through adjustment of entries and elimination of transactions between companies.

Consolidated financial statements are a group of entities financial statements that are presented as those of a single economic entity. They are the financial statements of a group in which the parent company and its subsidiaries introduce their assets, liabilities, equity, revenue, expenses and cash flows as those of a single business organization.

A consolidated balance sheet provides a parent company's assets and liabilities and all of its subsidiaries in a legal document, without any differentiation on which items pertain to which companies.

Corporation, SG credits the $3,200.5 million book value to the Equity Investment

account to remove that account from the consolidated balance sheet. The offsetting debits

and credits will remove Incorporation, BT 's early-of-year stockholders ' equity and

recognize the excess of the fair value of the acquired assets and liabilities assumed

exceeding their respective book values as reported assets and liabilities on the

consolidated balance sheet.