a. | |||
The fair value of the consideration includes | |||
Fair value of stock issued(20000*75) | $ 1,500,000 | ||
Contingent performance obligation | $ 30,000 | ||
Fair value of consideration transferred | $ 1,530,000 | ||
b. | |||
Stock issue costs reduce additional paid-in capital | |||
c. | |||
In a business combination, direct acquisition costs (such as fees paid to investment banks for arranging the transaction) are recognized as expenses. | |||
d. | |||
The par value of the 20,000 shares issued is recorded as an increase of $20,000 in the Common Stock account. The $74 fair value in excess of par value ($75 – $1) is an increase to additional paid-in capital of $1,480,000 ($74 × 20,000 shares). | |||
e. | |||
Fair value of consideration transferred (above) | $ 1,530,000 | ||
Receivables | $ 109,500 | ||
Patented technology | $ 115,000 | ||
Customer relationships | $ 762,000 | ||
In-process research and development | $ 546,000 | ||
Liabilities | $ (442,000) | $ 1,090,500 | |
Goodwill | $ 439,500 | ||
f. | |||
Revenues and expenses of the subsidiary from the period prior to the combination are omitted from the consolidated totals. Only the operational figures for the subsidiary after the purchase are applicable to the business combination. The previous owners earned any previous profits. | |||
g. | |||
The subsidiary’s Common Stock and Additional Paid-in Capital accounts have no impact on the consolidated totals. | |||
h. | |||
Fair value of consideration transferred (above) | (20000*50)+30000 | $ 1,030,000 | |
Receivables | $ 109,500 | ||
Patented technology | $ 115,000 | ||
Customer relationships | $ 762,000 | ||
In-process research and development | $ 546,000 | ||
Liabilities | $ (442,000) | $ 1,090,500 | |
gain on bargain purchase | $ 60,500 | ||
The values of SafeData’s assets and liabilities would be recorded at fair value, but there would be no goodwill recognized and a gain on bargain purchase would be reported. |
SafeData Corporation has the following account balances and respective fair values on June 30 Book Values...
SafeData Corporation has the following account balances and respective fair values on June 30 Book Values Fair Values Receivables Patented technology Customer relationships In-process research and development Liabilities Common stock Additional paid-in capital Retained earnings deficit, 1/1 Revenues Expenses 109,500 109,500 115,000 115,000 762,000 546,000 (442,000 (442,000) (100,000) (300,000) 734,700 (486,000) 368,800 Privacy First, Inc., obtained all of the outstanding shares of SafeData on June 30 by issuing 20,000 shares of common stock having a $1 par value but a...
SafeData Corporation has the following account balances and respective fair values on June 30: Receivables Patented technology Customer relationships In-process research and development Liabilities Common stock Additional paid-in capital Retained earnings deficit, 1/1 Revenues Expenses Book Values $ 124,500 178,000 0 0 (464,000) (100,000) (300,000) 673, 100 (458,000) 346,400 Fair Values $ 124,500 178,000 714,000 366,000 (464,000) Privacy First, Inc., obtained all of the outstanding shares of SafeData on June 30 by issuing 20,000 shares of common stock having a...
SafeData Corporation has the following account balances and respective fair values on June 30: Book Values Fair Values Receivables $ 110,000 $ 110,000 Patented technology 126,000 126,000 Customer relationships 0 504,000 In-process research and development 0 492,000 Liabilities (520,000 ) (520,000 ) Common stock (100,000 ) Additional paid-in capital (300,000 ) Retained earnings deficit, 1/1 802,400 Revenues (492,000 ) Expenses 373,600 Privacy First, Inc., obtained all of the outstanding shares of SafeData on June 30 by issuing 20,000 shares of...
SafeData Corporation has the following account balances and respective fair values on June 30: Book Values Fair Values Receivables $ 104,000 $ 104,000 Patented technology 162,000 162,000 Customer relationships 0 732,000 In-process research and development 0 484,000 Liabilities (448,000 ) (448,000 ) Common stock (100,000 ) Additional paid-in capital (300,000 ) Retained earnings deficit, 1/1 686,000 Revenues (420,000 ) Expenses 316,000 Privacy First, Inc., obtained all of the outstanding shares of SafeData on June 30 by issuing 20,000 shares of...
SafeData Corporation has the following account balances and respective fair values on June 30: Book Values Fair Values Receivables $ 83,500 $ 83,500 Patented technology 149,000 149,000 Customer relationships 0 748,000 In-process research and development 0 590,000 Liabilities (576,000 ) (576,000 ) Common stock (100,000 ) Additional paid-in capital (300,000 ) Retained earnings deficit, 1/1 833,900 Revenues (352,000 ) Expenses 261,600 Privacy First, Inc., obtained all of the outstanding shares of SafeData on June 30 by issuing 20,000 shares of...
SafeData Corporation has the following account balances and respective fair values on June 30: Book Values Fair Values Receivables $ 86,000 $ 86,000 Patented technology 121,000 121,000 Customer relationships 0 688,000 In-process research and development 0 528,000 Liabilities (476,000 ) (476,000 ) Common stock (100,000 ) Additional paid-in capital (300,000 ) Retained earnings deficit, 1/1 775,800 Revenues (434,000 ) Expenses 327,200 Privacy First, Inc., obtained all of the outstanding shares of SafeData on June 30 by issuing 20,000 shares of...
SafeData Corporation has the following account balances and respective fair values on June 30:Book ValuesFair ValuesReceivables$128,500$128,500Patented technology163,000163,000Customer relationships0712,000In-process research and development0626,000Liabilities(532,000)(532,000)Common stock(100,000)Additional paid-in capital(300,000)Retained earnings deficit, 1/1760,100Revenues(498,000)Expenses378,400Privacy First, Inc., obtained all of the outstanding shares of SafeData on June 30 by issuing 20,000 shares of common stock having a $1 par value but a $75 fair value. Privacy First incurred $10,000 in stock issuance costs and paid $75,000 to an investment banking firm for its assistance in arranging the combination....
SafeData Corporation has the following account balances and respective fair values on June 30: Privacy First, Inc., obtained all of the outstanding shares of SafeData on June 30 by issuing 20,000 shares of common stock having a $1 par value but a $60 fair value. Privacy First incurred $10,000 in stock issuance costs and paid $60,000 to an investment banking firm for its assistance in arranging the combination. In negotiating the final terms of the deal, Privacy First also agrees...
The following book and fair values were available for Westmont Company as of March 1. Book Value Fair Value Inventory $ 588,500 $ 549,000 Land 780,000 1,045,500 Buildings 1,755,000 2,056,500 Customer relationships 0 840,000 Accounts payable (101,500 ) (101,500 ) Common stock (2,000,000 ) Additional paid-in capital (500,000 ) Retained earnings, 1/1 (378,000 ) Revenues (448,000 ) Expenses 304,000 Arturo Company pays $4,180,000 cash and issues 22,700 shares of its $2 par value common stock (fair value of $50 per...
The following book and fair values were available for Westmont Company as of March 1 Book Value Fair Value Inventory Land Buildings Customer relationships Accounts payable Common stock Additional paid-in capital Retained earnings 1/1 Revenues Expenses $ 609,250 $572,250 755, 250 1,050,000 1,800,000 2,152,500 849,750 (91,000) 91,0) (2,000,000) (500,000) (416,500) (481,500) 324,500 Arturo Company pays $4,150,000 cash and issues 20,900 shares of its $2 par value common stock (fair value of $50 per shae)for all of Westmont's common stock in...