Question

Create a fair value allocation and goodwill schedule at the date of the acquisition.

Arizona Corp. had the following account balances at 12/1/19:

• Receivables: $96,000; Inventory: $240,000; Land: $720,000; Building: $600,000; Liabilities: $480,000; Common stock: $120,000; Additional paid-in capital: $120,000; Retained earnings, 12/1/19: $840,000; Revenues: $360,000; and Expenses: $264,000.

Several of Arizona's accounts have fair values that differ from book value. The fair values are:

• Land — $480,000; Building — $720,000; Inventory — $336,000; and Liabilities — $396,000.

Inglewood Inc. acquired all of the outstanding common shares of Arizona by issuing 20,000 shares of common stock having a $6 par value, but a $66 fair value. Stock issuance costs amounted to $12,000.

Answer 1

Fairvalue allocation and goodwill schedule

	$	$
Purchase Consideration		1320000
Less Book value of net assets acquired
receivables	96000
inventory	240000
Land	720000
Building	600000
Liabilities	480000	1176000
Excess fairvalue over bookvalue		144000
Less Fair value adjustments
Land	-240000
Building	120000
Inventory	96000
Liabilities	84000	60000
Goodwill		84000

Alternative method

Purchase Consideration		1320000
Less Fair value of net assets acquired
receivables	96000
inventory	336000
Land	480000
Building	720000
Liabilities	396000	1236000
Goodwill		84000