Determining the Appropriate Accounting Treatment for an Acquisition
The notes to recent financial statements of Colgate-Palmolive contained the following information (dollar amounts in millions):
Assume that Colgate-Palmolive acquired 100 percent of the fair value of the net assets of Tom’s of Maine in a recent year for $100 million in cash. Tom’s of Maine’s assets at the time of the acquisition had a book value of $70 million and a fair value of $82 million. Colgate-Palmolive also assumed Tom’s of Maine’s liabilities of $24 million (book value and fair value are the same). Prepare the entry on the date of acquisition as a merger.
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