Question

ClassCo acquires StudentCo with pre acquisition Balance Sheets below ClassCo pays $670,000 cash +52,950,000 in ClassCo shares (new issue] 670,000 ClassCo determines Fair value of StudentCo assets as follows: 2,950,000 Student Co. was not dissolved FV adjustments to BS items A/R 50,000 the fair value[FV1 greater than BV by amt on left Inventory 60,000 FV> BV Net PPE 90,000 the FV is greater than BV by amt. on left, life 5 years Current Liabilities 75,000 the FV less than BV for accrued expense in C.Liab. By amt, on left and the following FV assets were determined not on Student BS Patents 200,000 4 year life trademarks 150,000 indefinite ClassCo StudentCo Before Acquisition Assets: Cash StudentCo FV $s StudentCo Excess (less Book Ss A/R 1,090.000 3,100,000 2,200,000 6,390,000 440,000 1,100,000 1,450,000 2,990,000 Inventory Current Assets 4,400,000 1,800,000 Net PPE Investments Intangibles Goodwill Total Assets 110,000 from earlier investment 110,000 10,900,000 4,790,000

Answer 1

Book value - 25,000 of fair value } = Cliabilities } = 790,000 - 75,000 20.= $715,000 fair values of student co AIR = 1, 150,000 Claventory = 1,510,000 PPE = 11890,000 Current Liabilities = 715,000 (6) calculation of Goodwill I chain on Bargain Purchase on Acqusitors for value of Student conet euch ار AIR - 1,150,000 chenny - 510,000 ppe - 1,890,000 Current 2 - 290, co Assey J Total Assets 7,980,000 to Liabilities Cunen Lidbi (715,000) Long tom ob 1,800,000) 2,515,000) Net och 5,465,000