Incomplete Data Problem
On January 1, 20X2, End Corporation acquired all of Cork Corporation’s assets and liabilities by issuing shares of its common stock. Partial balance sheet data for the companies prior to the business combination and immediately following the combination are as follows:
| End Corp. Book Value | Cork Corp. Book Value | Combined Entity |
Cash | $ 40,000 | $ 10,000 | $ 50,000 |
Accounts Receivable | 60,000 | 30,000 | 88,000 |
Inventory | 50,000 | 35,000 | 96,000 |
Buildings and Equipment (net) | 300,000 | 110,000 | 430,000 |
Goodwill | _________ | _______ | ? |
Total Assets | $450,000 | $185,000 | $ ? |
Accounts Payable | $ 32,000 | $ 14,000 | $ 46,000 |
Bonds Payable | 150,000 | 70,000 | 220,000 |
Bond Premium | 6,000 |
| 6,000 |
Common Stock, $5 par | 100,000 | 40,000 | 126,000 |
Additional Paid-In Capital | 65,000 | 28,000 | 247,000 |
Retained Earnings | 97,000 | 33,000 | ? |
Total Liabilities and Equities | $450,000 | $185,000 | $ ? |
a. What number of shares did End issue to acquire Cork’s assets and liabilities?
b. What was the market value of the shares issued by End?
c. What was the fair value of the inventory held by Cork at the date of combination?
d. What was the fair value of the net assets held by Cork at the date of combination?
e. What amount of goodwill, if any, will be reported by the combined entity immediately following the combination?
f. What balance in retained earnings will the combined entity report immediately following the combination?
g. If the depreciable assets held by Cork had an average remaining life of 10 years at the date of acquisition, what amount of depreciation expense will be reported on those assets in 20X2?
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