Sale And Insurance Contracts Should Be Measured At Their Fair Market Value Essay

Wally, business owner of Windy City Watches is located in downtown Chicago, IL. Business is booming and Wally needs to buy a large quantity of Rolek watches which sell for $50 apiece. He calls Randy Rolek, the wholesaler located in Milwaukee WI. They discuss terms on the phone for a while before coming to an agreement in which Wally offers to buy 100 watches for $25 each. Randy sends over an order form in which Wally states that he is agreeing to purchase watches from Randy for $25 each, but does not include the quantity in which he will buy. Randy sends 50 watches the following week with a note included stating that he has sent 50 watches and will send the other remaining 50 watches within a few days but includes the bill for the full

Two main risks need to be considered with this acquisition. The first risk is the contingent liabilities arising from Elson’s compensation and accumulated earnings from PTI’s interest-earning assets. Lane should provide the bank information on the accountant’s opinion on these contingent liabilities as rationale the bank’s valuation needs to discount them from their asking price.

Which of the following should be included in the acquisition cost of a piece of

B The appraised value of the land is a good choice but it is based on the market. So to get more of a transaction them trading price of the stock is probably the best fit

vi) Goodwill- The beginning balance for Goodwill was determined by finding the difference between Total Assets and Total Liabilities at the beginning . Goodwill accounts for all the intangible assets that were transferred from the old company to the new company, including brand name, as well as a premium paid for the company. Goodwill was not amortized in this model.

If it is not clear whether an arrangement for payments to employees or selling shareholders is part of the exchange for the acquiree or is a transaction separate from the business combination, the acquirer should consider the following indicators:

Cisco allocates the fair value of the purchase consideration of its acquisitions to the tangible assets, liabilities, and intangible assets acquired. The excess fair value of the purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill.

Bernie a resident of Richmond, Virginia decides to sale his 2006 Ford Fusion for $13,000.00 and places an ad in his local newspaper on February 1st. After several weeks without any inquiries, Vivian contacts Bernie on March 1st stating she will pay him $12,000.00 for the car. Bernie arranges to meet with Vivian on March 5th to complete the deal. Vivian comes to Bernie’s house on March 10th and says she will give Bernie $12,500.00 for the car; but she needs three additional weeks to come up with the money. Bernie agrees but only if Vivian puts down a deposit. Vivian agrees and Bernie drafts an agreement stated the sale will must take place no later than March 31st. Vivian reads and signs the agreement and

Morris Mining Corporation owns and operates mining facilities that are located in the United States, and Canada. This company primarily distributes extracted ores and minerals to their customers. Recently, in January 2015, Morris Mining acquired the mining company King Co. Once the company has been acquired, Mining Morris plans to record the difference of the purchase price and identifiable net assets as goodwill. The identifiable assets and liabilities of King Co. are going to be recorded at fair value on Morris Mining 's books. There has been discussion as to how the company is going to report the fair value for the patent that is part of the assets they acquired from King Co. Rob, an audit manager on the Morris Mining engagement, and Gabriela, the audit senior, are trying to evaluate if the method of the fair value estimate it reasonable.

For calculations of the acquisition price, the P/E is taken to be 8.6. The acquisition price is calculated by multiplying this value with the historical average of net income. Thus, the acquisition price comes out to be $186,215,800, which is $189,186,673 less than the enterprise value.

The fair value of an asset is defined as ‘the price that would be received to sell an asset paid to transfer a liability in an orderly transaction between market participants at the measurement date” (Kieso, Weygandt, & Warfield, 2012). It is a market based measure (Averkamp, 2014). Over the past few years, Generally Accepted Accounting Principles has called for the use of fair value measurement in a company’s financial statements. This is what is referred to as the fair value principle (Kieso, Weygandt, & Warfield, 2012). The fair value of an asset or liability is based on an estimate of what the asset should be worth at the time of sale. This gives rise to some conflict among accounting professionals. It is believed that fair value may not be as accurate

(100%) of the assets in the Practice (the "Purchased Interest"). It is intended that the parties proceed with and endeavor to complete this transaction on the following

The purchase of all the outstanding common shares of Graystone would result in the value of net assets (goodwill) to be recorded on ERT’s separate-entity books as an investment account, as Graystone would continue to operate as a separate legal entity (a subsidiary under the acquiring firm). IFRS 3 requires the acquisition approach be used to record all the assets and liabilities of Graystone at FV on the consolidated statements. Using the five-step process for acquisition approach, the following is determined:

According to this concept the asset is recorded in the books of accounts at the price paid for it and not at its market value. For example: if a business entity purchases a building valued at $15 million from a friend for $12 million, this asset would be recorded at $12 million and not at $ 15 million, because for the business entity the cost was $12 million and not $15 million.

* To recognise separately, at the acquisition date, the acquiree’s identifiable assets, liabilities and contingent liabilities.