Chapter 3, Problem 23P

On May 31, 2021, Ivanhoe Company paid $3,640,000 to acquire all of the common stock of Oriole Corporation, which became a division of Ivanhoe. Oriole reported the following balance sheet at the time of the acquisition: Current assets   $  936,000   Current liabilities   $  624,000 Noncurrent assets   2,808,000   Long-term liabilities   520,000         Stockholder's equity   2,600,000 Total assets   $3,744,000   Total liabilities and  stockholder's equity   $3,744,000 It was determined at the date of the purchase that the fair value of the identifiable net assets of Oriole was $3,224,000. At December 31, 2021, Oriole reports the following balance sheet information: Current assets   $  832,000     Noncurrent assets (including goodwill recognized in purchase)   2,496,000     Current liabilities   (728,000 )   Long-term liabilities   (520,000 )   Net assets   $2,080,000     It is determined that the fair value of the Oriole division is $2,288,000. 1).…

On 1 July 2019, Brad Ltd acquired all of the assets and liabilities of Pitt Ltd. In exchange for these assets and liabilities, Brad Ltd issued 100 000 shares that at date of issue had a fair value of $5.20 per share. Costs of issuing these shares amounted to $1000. Legal costs associated with the acquisition of Pitt Ltd amounted to $1200. The asset and liabilities of Pitt Ltd at 1 July 2019 were as follows: Carrying amount Fair value Assets $ 2000 10000 64 000 320 000 $ 2000 10000 Cash Accounts receivable 68 000 232 000 Inventories Equipment Accumulated depreciation – equipment (96 000) 240 000 Patents 280 000 Liabilities (16 000) (64 000) Accounts payable (16000) (64 000) Debentures Required (a) Prepare the acquisition analysis at 1 July 2019 for the acquisition of Pitt Ltd by Brad Ltd.

On May 31, 2020, Roddick Company paid $3,400,000 to acquire all of the ordinary shares of Bolt Corporation, which became a division of Roddick. Bolt reported the following statement of financial position at the time of the acquisition:     Equity $2,500,000 Non-current assets $2,700,000 Non-current liabilities 500,000 Current assets       900,000 Current liabilities       600,000 Total assets $3,600,000 Total equity and liabilities $3,600,000   It was determined at the date of the purchase that the fair value of the identifiable net assets of Bolt was $2,800,000. On December 31, 2020, Bolt reports the following statement of financial position information: Current assets $   800,000 Non-current assets (including goodwill recognized in purchase)   2,400,000 Current liabilities (700,000) Non-current liabilities     (500,000) Net assets $2,000,000   It is determined that the recoverable amount value of the Bolt…

On July 31, 2020, Mexico Company paid $3,000,000 to acquire all of the common stock of Conchita Incorporated, which became a division (a reporting unit) of Mexico. Conchita reported the following balance sheet at the time of the acquisition. Current assets $  800,000 Current liabilities $  600,000 Noncurrent assets  2,700,000 Long-term liabilities 500,000     Total assets $3,500,000 Stockholders' equity  2,400,000         Total liabilities and stockholders' equity $3,500,000 It was determined at the date of the purchase that the fair value of the identifiable net assets of Conchita was $2,750,000. Over the next 6 months of operations, the newly purchased division experienced operating losses. In addition, it now appears that it will generate substantial losses for the foreseeable future. At December 31, 2020, Conchita reports the following balance sheet information. Current assets $  450,000  Noncurrent assets (including goodwill recognized in purchase)…

On January 01, 2021, Batman Corp. acquired 75% of the outstanding stock of Superman Co. for P1,380,000 cash. The book value of Superman Co's net assets was P1,200,000. Batman Corp. determined that the inventory and plant assets (remaining life of 5 years) of Superman Co. were understated by P100,000 and P300,000, respectively. Superman Co's net income for the year ended December 31, 2021 was P500,000. During the year 2021, Batman Corp. received P240,000 cash dividends from Superman Co. The fair value of NCI was determined at P445,000. Loss on impairment of goodwill was P25,000. Net income of B Corp. under the cost method amounted to P1,000,000. B Corp. is using the fair value method in measuring NCI. How much is the Investment Balance on December 31, 2021 on the books of Batman Corp. under the equity method? a.1,395,000 b.1,375,000 c.1,615,000 d.1,380,000

On July 31, 2020, Ivanhoe Company paid $3,000,000 to acquire all of the common stock of Conchita Incorporated, which became a division (a reporting unit) of Ivanhoe. Conchita reported the following balance sheet at the time of the acquisition. Current assets   $750,000   Current liabilities   $500,000 Noncurrent assets   2,700,000   Long-term liabilities   400,000    Total assets   $3,450,000   Stockholders’ equity   2,550,000            Total liabilities and stockholders’ equity   $3,450,000 It was determined at the date of the purchase that the fair value of the identifiable net assets of Conchita was $2,755,000. Over the next 6 months of operations, the newly purchased division experienced operating losses. In addition, it now appears that it will generate substantial losses for the foreseeable future. At December 31, 2020, Conchita reports the following balance sheet information. Current assets   $480,000   Noncurrent assets…

Adams Corporation acquired 90 percent of the outstanding voting shares of Barstow, Inc., on December 31, 2019. 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, 2019, Barstow had the following account balances: Current assets Land Buildings (10-year remaining life) Equipment (5-year remaining life) Patents (10-year remaining life) Notes payable (due in years) Common stock Retained earnings, 12/31/19 Debits Current assets Land Buildings. Equipment Investment in Barstow, Inc. Cost of goods sold Depreciation expense December 31, 2021, adjusted trial balances for the two companies follow: Adams Corporation Interest expense Dividends declared Total debits Credits Notes payable Common stock Retained earnings, 1/1/21 Revenues Investment income Total credits Book Value $ 160,000 120,000 220,000 160,000 $ 0 (200,000) (180,000) (280,000)…

On January 1, 2021, P Corporation purchases from an unrelated person all the outstanding stock of S Corporation for $90,000. S's balance sheet on the purchase date is as follows: Basis Fair Market Value Assets Cash $ 5,000 $ 5,000 Accounts Receivable 20,000 20,000 Inventory (LIFO) 20,000 40,000 Equipment (accumulated depreciation of $10,000) 30,000 45,000 Total Assets $75,000 $110,000 Liabilities Accounts payable $20,000 $ 20,000 Equity 55,000 90,000 Total liabilities and equity $75,000 $110,000 P properly elects § 338. S's tax rate is 21 percent. a. What is the aggregate basis of S's assets after this transaction? b. What is the basis for each individual asset?

On January 1, 2021, P Corporation purchases from an unrelated person all the outstanding stock of S Corporation for $90,000. S’s balance sheet on the purchase date is as follows: Assets Basis Fair Market Value Cash $ 5,000 $ 5,000 Accounts Receivable 20,000 20,000 Inventory (LIFO) 20,000 40,000 Equipment (accumulated depreciation of $10,000) 30,000 45,000 Total Assets $75,000 $110,000 Liabilities     Accounts payable $20,000 $ 20,000 Equity   55,000 90,000 Total liabilities and equity $75,000 $110,000 P properly elects § 338. S’s tax rate is 21 percent. a. What is the aggregate basis of S’s assets after this transaction? b. What is the basis for each individual asset?