E3.4_E3.6_E4.1_P3.6c - Differences Micro has understated...

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Frances Alaniz Acct.721 02/11/2016 Homework E3.4 Eliminating Entries with Previously Unreported Intangibles (in millions) ProLock Senyo Dr Cr Consol Investment in Senyo 10,000 6,000 E 4,000 R In-Process R&D 1,000 R Goodwill 4,000 R Stockholders Equity 6,000 6,000 E E3.6 Acquisition and Eliminating Entries, Bargain Purchase a. Record Publix’s acquisition entry. Investment in Sherman 2,750,000 Cash 2,750,000 b. Prepare working paper eliminating entries. (in millions) Publix Sherman Dr Cr Consol Inventory 1,500 100 R Land 100 100 R Other plan assets 800 250 R L-T Debt 400 30 R Investment in Sherman 2,750 2,500 E 250 R In millions Acq. Cost 10,000 BV of Sherman 6,000 Cost in excess of BV 4,000 Diff. between FV and book: Goodwill 4,000 In millions Acq. Cost 2,750 BV of Sherman 2,500 Cost in excess of BV 250 Diff. between FV and book: Inventories 100 Land 100 Other plant assets 250 L-T debt 30 280 Gain on acquisition -30
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Frances Alaniz Acct.721 02/11/2016 Homework P3.6c Consolidated Balances, Different Acquirers (c) Similarities: they both report the same total assets, liabilities and equity;
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Unformatted text preview: Differences: Micro has understated assets as well as unrecorded intangibles which must be revalued while Webnet has no unrecorded intangibles and has assets that are fairly stated The balances are different due to the revaluing of assets. I think management may prefer Webnet to be the acquirer. This would bring forth Micro’s unrecorded identifiable intangibles such as developed technology which could point to a favorable future earnings potential, leading to increased stock prices. Plus the investors would find the disclosures of the identifiable intangibles as a good thing considering technology is the basis of the company. E4.1 Equity Method Accounting 1/2/16 Investment in Johnson 900,000,000 Cash 900,000,000 12/31/16 Investment in Johnson 60,000,000 Equity method income 60,000,000 Cash 30,000,000 Investment in Johnson 30,000,000 60 = sub’s income of 65 minus excess depreciation expense of 25/5...
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