Question

Brightcove, Inc. acquires all of stock of Ciber, Inc. for $80 million in cash and accounts for the acquisition as a stock acquisition. Balance sheet information at the date of acquisition is as follows (in thousands)

Ciber Book Value Ciber Fair Value            Brightcove, Inc. Book Value

Current assets                                   $400                       $250                       $40,000

Plants and equipment $12,000 $5,000 $ 200,000

Licenses and trademarks $5,000 $8,000

Investment in Ciber $80,000

Current liabilities $ (800) $(800) $(80,000)

Long-term liabilities $ (10,000) $(9,500) $(150,000)

Capital Stock $ (8,000) $(35,000)

Retained earnings $ 1,400 $(55,000)

Brightcove hires a consultant to identify and value any previously unreported intangible assets attributable to Cider at the date of acquisition. The consultant identifies the following intangibles (in thousands):

                                                                                                                       Fair Value

Customer contracts $2,000

Assembled workforce $25,000

Brand names $3,000

Leases at rents below current market $500

Developed technology $200

In-process research and development $ 1,000

Future cost savings from elimination of duplicate assets $ 400

Additional expected revenues from bundling products $ 800

Required

1. Prepare a schedule of the excess of acquisition cost over Ciber’s book value and its allocation to Ciber’s identifiable net assets and goodwill.
2. Prepare a working paper to consolidate the balance sheet accounts of Brightcove and Ciber at the date of acquisition
3. Prepare the consolidated balance sheet at the date of acquisition.

Answer 1

Part A

Acquisition cost		80000
Ciber book value		6600
Excess of acquisition cost over book value		73400
Excess of fair value over book value:
Current assets	(150)
Plant and equipment, net	(7000)
Licenses and trademarks	3000
Long term liabilities	500
Customer contracts	2000
Brand names	3000
Favorable leases	500
Developed technology	200
In-process R&D	1000	(3050)
Goodwill		$70350

8000-1400 = 13200

Part B

	Brightcove Dr(Cr)	Ciber Dr(Cr)		Dr.	Cr.		Consolidated Balances Dr(Cr)
Current assets	40000	400			150	R	40250
Plant and equipment, net	200000	12000			7000	R	205000
Licenses and trademarks		5000	R	3000			8000
Investment in Ciber	80000				6600	E
					73400	R
Customer contracts			R	2000			2000
Brand names			R	3000			3000
Favorable leases			R	500			500
Developed technology			R	200			200
In-process R&D			R	1000			1000
Goodwill			R	70350			70350
Current liabilities	(80000)	(800)					(80800)
Long-term liabilities	(150000)	(10000)	R	500			(159500)
Capital stock	(35000)	(8000)	E	8000			(35000)
Retained earnings	(55000)	1400			1400	E	(55000)
Total				88550	88550

Part C

Brightcove, Inc. and Subsidiary Consolidated Balance Sheet Date of Acquisition
Assets		Liabilities
Current assets	40250	Current liabilities	80800
Plant and equipment, net	205000	Long-term liabilities	159500
Licenses and trademarks	8000	Total liabilities	240300
Other identifiable intangible assets	6700	Stockholders’ equity
Goodwill	70350	Capital stock	35000
		Retained earnings	55000
		Total equity	90000
Total assets	330300	Total liabilities and equity	330300