Question

7АСС4083 Advanced Accounting Chapter 1 Handout Problem Part I: Percy Corporation acquired the net assets of Sub1 and Sub2 on January 1, 2019 To purchase Sub1 Percy issued 30,000 shares of it $1 par common stock . Percy agreed to pay an additional $150,000 if Subl's net income exceeded $200,000 for the next three years The probablity of achieving that net ncome target is 60%. The present value factor of $1 to be received at the end of 3 years at an 8% discount rate is:79383. Percy paid acquisition and stock issuance costs of $5,000 and $12.000 To purchase Sub2: Percy issued 12,000 shares of its $1 par common stock Percy paid acquisition and stock issuance costs of $3,000 and $4,000 The fair value of Percy's stock on the date of purchase was $45 per share. A list of account bal Subl and Sub2 are as follows ances and fair values of List of Account Balances and Fair Values January 1, 2019 Subl Sub2 Book Value Account Cash Accounts Receivable Inventory Property, Plant, &Equipment (net) Patents In-Process R&D Project Customer List Current Liabilities Bonds Payable Common Stock Retained Earnings Book Value Fair Value Fair Value $ 65,000 200,000 65,000 190,000 35,000 80,000 85,000 240,000 $ 35,000 70,000 100,000 600,000 150,000 170,000 500,000 12,000 80,000 70,000 60,000 160,000 100,000 300,000 367,000 160,000 55,000 100,000 100,000 185,000 105,000 Required: On the following pages, prepare a determination of goodwill for each purchase and prepare the journal entry on Percy's books to record each.

Answer 1