Question

16. Francisco Inc. acquired 100 percent of the voting shares of Beltran Company on January 1, 2017. In exchange, Francisco paid $450,000 in cash and issued 104,000 shares of its own $1 par value common stock. On this date, Francisco's stock had a fair value of $12 per share. The combination is a statutory merger with Beltran subsequently dissolved as a legal corporation. Beltran's assets and liabilities are assigned to a new reporting unit. The following reports the fair values for the Beltran reporting unit for January 1, 2017, and December 31, 2018, along with their respective book values on December 31, 2018. Fair Values 12/31/18 Beltran Reporting Unit Cash Receivables Inventory Patents Customer relationships Equipment (net) Goodwill Accounts payable Long-term liabilities Fair Values 1/1/17 $ 75,000 193,000 281,000 525,000 500,000 295,000 ? (121,000) (450,000) $ 50,000 225,000 305,000 600,000 480,000 240,000 Book Values 12/31/18 $ 50,000 225,000 300,000 500,000 450,000 235,000 400,000 (175,000) (400,000) (175,000) (400,000) a. Prepare Francisco's journal entry to record the assets acquired and the liabilities assumed in the Beltran merger on January 1, 2017. b. On December 31, 2018, Francisco opts to forgo any goodwill impairment qualitative assessment and estimates that the total fair value of the entire Beltran reporting unit is $1,425,000. What amount of goodwill impairment, if any, should Francisco recognize on its 2018 income statement?

Answer 1

Answers @ Journal entry: Cash paid = $450,000 fair value os shaves issued = 104,000 x $12 = $1248000 Consideration to cd = 450,000 + 1248000 = $1698000 fair values of net assets acquired = 15,000 + 193,000 + 281,000 +52 5,000+500,000 + 295000 - 121,000 - 450,000 = $1298000 Goood will = $1698000 - 1298000 - $400000

Credit Journal entry to record acquisition entry: Account title Debit Cash $75,000 Receivable $ 193,000 Inventory $281,000 Patents $525,000 $500,000 customer relationships Equipment (net) Goodwill $295,000 $400000 $10,000 $450,000 To accounts payable To long term liabilities 1. To cash To common stock Coface value) To additional paid in capital $450,000 $104,000 $1144000 * Good cofill impairment fases får value of reporting wit as a whole = $1,425,000

fair value ds reporting units het assets = 50,000 +225,000 +305,000 + 600,000 + 480,000 +240,000 - 175,000 -400,000 = $1325000 Impaired fair value of good will = $1,425,000 - $ 1325000 --$100000 Book value dr goodwill = $400,000 Goodwill impairment loss = 100000 - 400,000 = ($300000) . Goodwill impairment loss = ($300000)