Question

u um IL SUUSIulary sequity accounts and revalues the parent's assets and liabilities to fair value Use the following information to answer questions 5-8 below. All amounts are in thousands. PR Company pays $10,000 in cash and issues stock with a fair value of $40,000 to acquire all of SX Cor noration's stock. SX will be a subsidiary of PR. Balance sheet accounts just prior to the acquisition areas follows, in trial balance format: PR Company Book value Dr (Cr) Current assets ...... Property, plant & equipment, net..... Identifiable intangible assets ..... Current liabilities. .. Long-term debt ... Capital stock ...... Retained earnings ....................... Accumulated other comprehensive income.... Treasury stock.. Total ......... $ 14,000 110,000 800 (13,000) (60,000) (44,400) (8,000) (200) 800 SX Corporation Book value Fair value Dr (Cr) Dr (Cr) $ 2,000 $ 4,200 10,000 6,000 4,000 14,000 (1,600) (2.000) (12,000) (11,600) (5,000) (8,000) 1,000 9,600 0 PR's consultants find these items that are not reported on SX's balance sheet: Fair value Potential contracts with new customers... Advanced production technology ........ Future cost savings ..... Customer lists .... $6,000 4,000 2,000 1,000 Outside consultants are paid $200 in cash, and registration fees to issue PR's new stock are $400.

Please show work.

Answer 1

5.

Cash paid (10,000+200+400)	10,600
Capital stock (44,400-5,000)	39,400
Total acquisition cost	50,000

Option A is the answer

6.

The entry would be

Capital stock	5,000
Retained earnings	8,000
Accumulated other comprehensive income		1,000
Treasury stock		9,600
Investment in SX corporation (bal fig)		2,400

Option A is the answer

7.

On the consolidation working paper at the date of acquisition, elimination (R) debits identifiable intangible assets by

= Fair value 14,000 - Book value 4,000 + Advanced production technology 4,000 + Customer list 1,000

= 15,000

Option C is the answer

8.

Option D

Amount to be debited to long term debt

= Book value 12,000 - Fair value 11,600

= Debit of 400

.

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