Question

Francisco Inc. acquired 100 percent of the voting shares of Beltran Company on January 1, 2017. In exchange, Francisco paid $889,250 in cash and issued 105,000 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	$	116,000		$	90,000		$	90,000
Receivables		236,250			280,500			280,500
Inventory		385,000			412,000			397,200
Patents		627,000			714,000			589,250
Customer relationships		663,000			624,000			592,000
Equipment (net)		334,500			266,000			259,550
Goodwill		?			?			496,000
Accounts payable		(142,500	)		(231,000	)		(231,000	)
Long-term liabilities		(566,000	)		(508,000	)		(508,000	)

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 $1,767,500. 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

Note: Enter debits before credits.

	Date General Journal Debit Credit January 01, 2017

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 $1,767,500. What amount of goodwill impairment, if any, should Francisco recognize on its 2018 income statement?

	Goodwill impairment loss

Answer 1

Description This problem represents the journal entries in the booles of Francisco inc. as it acquired all the shares of Beltron Company in a Statutory merger. It also shows the amount of good will impairment of Fransisco inc. Solution Journal Entries in the books of Francisco inc. as on 11/17 Date 1/1117 I Genesal Journal Debit Business Purchase Alc. ...D. 21492 50 Credit to Liquidator to Beltron Ale! (2149250 (Working notes - 1) Cash ole . - 1. - Dr. 116,000 Receivables Alea . Dr. 236,250 Inventory Me .. . Dr. 385,000 Patents Mer i Dr. 627,000 Customer relation shipple... D. 663,000 Equipment Merr Dr. 334,500 D. 426,000 Goodwill (Coloncing figure) to Accounts Payable Ale to Longyeom liabilities Me to Business Purchose Me 2149 250 142.500 566 000

Journal Entries (Continued) C ir 2149.50 105000 1155 000 tavida tor to Be Haon Mer to share Capital, se (to so to securities porsion Me (tom ) to Bank ole 889250 7,156,250 7,156,250 Calculation of broodwill Impairment Loss for the year ended 12/31/18 Goodwill as per Book value & Net Assets = $1965500 (Given) Purchase consideration = $2149 250 - Goodwill - $2149250 - $1965 500 $183750 Il as per Francisco inc. t n Net Assets $1767 500 Paschare Consideration $2149250

. Good coill = 214925o. 176it 500 3814.00 Girodosill Impairment Cost = 3817 ro-183450 $198.000 , Working Noter t Calculation of Business Perchase Cast & 1 889, 250 Shares & 105000 & 12 $12 60,000