Question

Francisco Inc. acquired 100 percent of the voting shares of Beltran Company on January 1, 2017. In exchange, Francisco paid $815,500 in cash and issued 114,000 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.

Beltran Reporting Unit	Fair Values 1/1/17			Fair Values 12/31/18			Book Values 12/31/18
Cash	$	86,000		$	51,000		$	51,000
Receivables		217,000			259,500			259,500
Inventory		373,000			406,000			391,600
Patents		695,500			778,000			661,500
Customer relationships		650,000			620,000			570,000
Equipment (net)		368,500			281,000			275,800
Goodwill		?			?			554,000
Accounts payable		(154,500	)		(233,000	)		(233,000	)
Long-term liabilities		(606,000	)		(546,000	)		(546,000	)

1. Prepare Francisco’s journal entry to record the assets acquired and the liabilities assumed in the Beltran merger on January 1, 2017.

2. 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 $1,768,000. What amount of goodwill impairment, if any, should Francisco recognize on its 2018 income statement?

Prepare Francisco’s journal entry to record the assets acquired and the liabilities assumed in the Beltran merger on January 1, 2017. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Show the amount of cash received and paid as two separate amounts.)

Journal entry worksheet

• Record the assets acquired and the liabilities assumed in the Beltran merger on January 1, 2017.

Note: Enter debits before credits.

	Date General Journal Debit Credit January 01, 2017

Answer 1

Answer Page: No 0 assets acquired and liabilities O Journal entry to record the assumed www mo1901 n 1, 2014 AA $368,500 Particular | Debit Credit I 'Cash $ 86000 Receivable $217000 Inventory $373000 Patents $695,500 Customer selationships $650,000 Equipment (net) Goodwill $ 554000 To Accounts payable $154,500 To longterm liabilites $ 606000 1. To cash $ 815,600 To commop esfock (face value) $ 114000 To additional paid in capital $ 12954000 working s Cash paid - $ 815,500 far vakre of shares issued = 114000 shares x $12 Sabane = 61368000

Consideration transferred - 815,500 + 1368000 en Page, No@ $2183500 fair values of net assets acquined = 86000 + 214000 + 343000 + 695500 + 650,000 + 368500 - 154500-606000 = $1629500 1. Goodwill - 2183500 – 1629500 = $ 554000 Common sfock = 114000 shares x $1 pan value = $114000 Additional paid in capital - (86000 + 217000 + 373000 + 695500 + .650000 + 368500 +594000) – (1545007 .606000 +815500 + 114000) = $2944000 – 1690000 s $1254000 ::. Aditional prid.in capital - $1254000...

Page No ③ @ Goodwill impairment fons Total fair value of entire beltran reporting unit - $1468000 fair value of reporting whils net asseks on 12/31/18 . = 51000 + 259500 406000 + 448000 + 680000 of 281000 - 233000~ 546000 = $1616500 Iripoined fair value of goodwill - 1468000 -- (616500 a $ 151500 Book value of goatsoill = $ 554000 Goodwill impairment lors - 151500 ~ 554000 = ($402600) 7Geodwill impairment lors - ( 4403500) 1.