Problem

Leftwich recently acquired all of Kew Corporation’s stock and is now consolidating the fin...

Leftwich recently acquired all of Kew Corporation’s stock and is now consolidating the financial data of this new subsidiary. Leftwich paid a total of $650,000 for the company, which has the following accounts:

 

Fair Value

Tax Basis

Accounts receivable.

$110,000

$110,000

Inventory

130,000

130,000

Land

100,000

100,000

Buildings

180,000

140,000

Equipment

200,000

150,000

Liabilities

(220,000)

(220,000)

Assume that the effective tax rate is 30 percent. On a consolidated balance sheet prepared immediately after this takeover, what impact does the acquisition of Kew have on the individual asset and liability accounts reported by the business combination?

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Solutions For Problems in Chapter 7