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Deferred stock issue costs 25000 cash record costs

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Unformatted text preview: the acquiree, if any GOODWILL 1-31 Sharp Company Balance Sheet Information, December 31, 20X0 Assets, Liabilities, and Equities Cash and Receivables Inventory Land Buildings and Equipment Accumulated Depreciation Patent Total Assets Current Liabilities Common Stock ($5 par) Additional Paid-In Capital Retained Earnings Total Liabilities and Equities Fair Value of Net Assets Book Value Fair Value $45,000 $45,000 65,000 75,000 40,000 70,000 400,000 350,000 (150,000) 80,000 $400,000 $620,000 100,000 100,000 50,000 150,000 $400,000 110,000 $510,000 Point Corporation acquires all of the assets and assumes all of the liabilities of Sharp Company in a statutory merger by issuing to Sharp 10,000 shares of $10 par common stock. Market value of shares issued Legal and appraisal fees Stock issue costs $610,000 $40,000 $25,000 1-32 Acquisition Method ­ Illustration 1-33 Acquisition Method ­ Illustration Entries Recorded by Acquiring Company Entries Recorded by Acquired Company Merger Expense 40,000 Cash 40,000 Record costs related to acquisition of Sharp Company. Deferred Stock Issue Costs 25,000 Cash Record costs related to issuance of common stock. 25,000 On the date of combination, Point records the acquisition of Sharp with the following entry: Cash and Receivables 45,000 Inventory 75,000 Land 70,000 Buildings and Equipment 350,000 Patent 80,000 Goodwill 100,000 Current Liabilities 110,000 Common Stock 100,000 Additional Paid-In Capital 485,000 Deferred Stock Issue Costs 25,000 Record acquisition of Sharp Company. Investment in Point Stock 610,000 Current Liabilities 100,000 Accumulated Depreciation 150,000 Cash and Receivables Inventory Land Buildings and Equipment Gain on Sale of Net Assets Record transfer of assets to Point Corporation. Common Stock 100,000 Additional Paid-In Capital 50,000 Retained Earnings 150,000 Gain on Sale of Net Assets 310,000 Investment in Point Stock Record distribution of Point Corporation stock. 45,000 65,000 40,000 400,000 310,000 610,000 1-34 Testing for Goodwill Impairment Fair Value Rep.Unit ↔ Carrying Amount Rep.Unit Fair Value > Carrying Amount No Impairment Fair Value < Carrying Amount Impairment Carrying Amount Rep.Unit’s Goodwill Implied Value Rep.Unit’s Goodwill Fair Value Rep.Unit – Fair Value Net Assets, excluding Goodwill 1-35 Bargain Purchase 1. Fair Value of the consideration given by the acquirer + 2. Fair Value of any interest in the acquiree already held by the...
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