Question

13-16. The financial balances for the Atwood Company and the Franz Company as of December 31, 20X1, are presented below. Also included are the fair values for Franz Company's net assets. Parenthesis indicate a credit balance. Assume an acquisition business combination took place at December 31, 20X1. Atwood issued 50 shares of its common stock with a fair value of $35 per share for all of the outstanding common shares of Franz. Stock issuance costs of $15 (in thousands) and direct costs of $10 (in thousands) were paid.

13. Compute consolidated land at the date of the acquisition. A. $2,060. B. $1,800. C. $260. D. $2,050.

14. Compute consolidated goodwill at the date of the acquisition. A. $360. B. $450. C. $460. D. $440.

15. Compute consolidated retained earnings at the date of the acquisition. A. $1,160. B. $1,170. C. $1,280. D. $1,290.

16. Compute consolidated revenues at the date of the acquisition. A. $3,540. B. $2,880. C. $1,170. D. $1,650. ***Answer with Clear Explanations and Complete Steps***

13-16. The financial balances for the Atwood Company and the Franz Company as of December 31, 20X1, are presented below. Also included are the fair values for Franz Company's net assets. Parenthesis indicate a credit balance. Atwood Franz Co. Franz Co. (all numbers are in thousands) Book Value Book Value Fair Value 12/31 20X112/31/20X112/31 20X1 540 400 Cash $ 870 $ 240 $ 240 Receivables 660 600 600 Inventory 1.230 420 580 Land 1,800 260 250 Buildings (net) 1,800 650 Equipment (net) 660 380 Accounts payable (570) (240) (240) Accrued expenses (270) (60) (60) Long-term liabilities (2,700) (1,020) (1,120) Common stock ($20 par) (1.980) Common stock ($5 par) (420) Additional paid-in capital (210) (180) Retained earnings (1,170) (480) Revenues (2,880) (660) Expenses 2,760 620 Assume an acquisition business combination took place at December 31, 20X1. Atwood issued 50 shares of its common stock with a fair value of $35 per share for all of the outstanding common shares of Franz. Stock issuance costs of $15 (in thousands) and direct costs of $10 (in thousands) were paid.

Answer 1

Answer to Question 1 : -

Compute consolidated land at the date of the acquisition

(A) Value of Land(Book Value) of Atwood Limited($) = 1800

(B) Add : Fair Value of Land to be Brought at Fair Value = 0250

Consolidated Value of Land ((A)+(B)   = 2050

Hence Consolidated Value of Land is 2050.

Answer : - Option D - 2050

Answer to Question 2 : -

Computation of Consolidated Goodwill at the date of acquisition -

Computation of Net Asset(Liabilities) to be Purchased by Atwood Limited of Franz Company

S. No.	Name of Asset or liability	$
1	Cash	240
2	Receivables	600
3	Inventory	580
4	Land	250
5	Building(Net)	650
6	Equipment (Net)	400
		2720
	Less : Liability Takeover
1	Accounts Payable	240
2	Accrued Expenses	60
3	Long Term Liability	1120
		1420
	Fair Value of Asset Acquired	1300

Computation of Purchase Considaration

No. of Shares issued X Issued Price of Share = 50X35 = 1750

Calculation of Consolidated Goodwill = Purchase Considaration - Net Fair Value of Asset Acquired

= 1750 - 1300 = 450

Hence Value of Goodwill is $ 450

Answer : - Correct Option is B. 450

Answer to Question 3 : -

At the Date of Acquisition while Consolidated Retained earning would include only the retained earning of Atwood Limited

Which is 1170

Reason for above answer is Under Purchase method Company will include only Asset and Liability to be brought up from Target company

Correct Answer is Option - B 1170

Answer to Question 4 : -

Consolidated Revenue will include revenue of Both the Company

Revenue of Atwood = 2880

Revenue of Franz Co. =0660

Consolidated Revenue = 3540

Hence Correct Answer is Option A 3540