Class Ch 2 - Consolidation of Financial Information

Class Ch 2 - Consolidation of Financial Information - ACCT...

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ACCT 456: C HAPTER 2 I N - CLASS A SSIGNMENT 1 On 31 December 2015, Alpha Co purchases 100% of the common stock of Beta Inc for $75,000 cash and 10,000 shares of Alpha’s $2 par value common stock. The market price of Alpha’s stock on the date of acquisition is $22 per share. As part of the acquisition Alpha incurred attorney and accountant fees of $40,000 and agreed to pay Beta a contingent payment of $252,000 if revenues in the coming year were $500,000 or greater. Alpha estimates that there is a 25% probability that Beta will meet the revenues goal and uses a 5% discount rate. The book value and fair value amounts for the balance sheet accounts of Beta are reported in Table 1. Assume that the values in Table 1 are taken immediately BEFORE recording the acquisition. 1. Compute the amount to be recorded for the contingent performance liability. 2. Assuming that Beta is dissolved after the acquisition prepare the journal entry(ies) to record the acquisition. 3.
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Class Ch 2 - Consolidation of Financial Information - ACCT...

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