King's Road recently acquired all of Oxford Corporation's stock and is now consolidating the financial data of thisnew subsidiary. King's Road paid a total of $895,000 for Oxford, which has the following accounts:Fair Value$ 183,000142,000104,000Tax Basis$ 183,000142,000104,000Accounts receivableInventoryLandBuildingsEquipment234,000235,000(245,000)190,000184,000(245,000)LiabilitiesRequired:a. What amount of deferred tax liability arises in the acquisition?b. What amounts will be used to consolidate Oxford with King's Road at the date of acquisition?c. On a consolidated balance sheet prepared immediately after this takeover, how much goodwill should King'sRoad recognize? Assume a 21 percent effective tax rate.

When Profit calculated as per the Tax basis is lower than the profit calculated as per the…

Answered: King's Road recently acquired all of…

Auditing: A Risk Based-Approach to Conducting a Quality Audit

10th Edition

ISBN:9781305080577

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter16: Advanced Topics Concerning Complex Auditing Judgments

Section: Chapter Questions

Problem 55RSCQ

See similar textbooks

Similar questions

King’s Road recently acquired all of Oxford Corporation’s stock and is now consolidating the financial data of this new subsidiary. King’s Road paid a total of $850,000 for Oxford, which has the following accounts: Fair value Tax Basis Accounts Receivable $153000 $153000 Inventory 141000 141000 Land 136000 136000 Buildings 276000 221000 Equipment 233000 160000 Liabilities (281000) (281000) a. What amount of deferred tax liability arises in the acquisition?b. What amounts will be used to consolidate Oxford with King’s Road at the date of acquisition?c. On a consolidated balance sheet prepared immediately after this takeover, how much goodwill should King’s Road recognize? Assume a 40 percent effective tax rate.
On January 1, 20x1, Magnum Corp. acquired all the identifiable assets and assumed the liabilities of Colt Corp. The book values and fair values of Magnum and Colt Corp. prior to business combination are as follows: Magnum Colt Book value Fair Value Book Value Fair Value Cash 6,000,000 6,000,000 1,000,000 1,000,000 Accounts Receivable 500,000 470,000 120,000 105,000 Allowance for doubtful account (40,000) (20,000) Inventories 1,000,000 950,000 500,000 510,000 Land 3,000,000 3,200,000 1,200,000 1,300,000 Building 2,000,000 1,600,000 1,000,000 850,000 Accumulated Depreciation (500,000) (200,000) Total 11,960,000 12,220,000 3,600,000 Accounts Payable 3,000,000 2,500,000 1,000,000 1,000,000 Notes Payable 500,000 480,000 600,000 550,000 Ordinary share - P100 par 4,000,000 1,000,000 Share premium 1,200,000 200,000…
Duko Corporation is acquiring the net assets, exclusive of cash, of Weber Company as of January 1, 2015, at which time Weber Company’s balance sheet is as follows: (see attachment)Duko Corporation feels that the following fair values should be used for Weber’s book values:Cash (no change) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 30,000Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,000Investment in marketable securities . . . . . . . . . . . . . . . . . . 150,000Land. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 450,000Buildings (no change) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 450,000Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 600,000Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120,000Income tax payable (no change). . . . . . . . . . . . . . . . . . . . 190,000Duko will issue 20,000 shares of its common…
Corvus Company has gained control over the operations of Glaive Corporation by acquiring 75% of its outstanding capital stock for P4,650,000. This amount includes a control premium of P225,000. Data from the balance sheets of the two entities included the following amounts as of the date of acquisition: Corvus Company Glaive Corporation Cash                        1,012,500                           800,000 Accounts Receivable, net                        2,770,000                           675,000 Inventory                        1,600,000                        1,200,000 Land                        3,000,000                        2,400,000 Building                        6,750,000                        3,400,000 Accumulated Depreciation - Building                       (1,687,500)                      (1,700,000) Equipment                          800,000                           250,000 Accumulated Depreciation…
Corvus Company has gained control over the operations of Glaive Corporation by acquiring 75% of its outstanding capital stock for P4,650,000. This amount includes a control premium of P225,000. Data from the balance sheets of the two entities included the following amounts as of the date of acquisition: Corvus Company Glaive Corporation Cash                        1,012,500                           800,000 Accounts Receivable, net                        2,770,000                           675,000 Inventory                        1,600,000                        1,200,000 Land                        3,000,000                        2,400,000 Building                        6,750,000                        3,400,000 Accumulated Depreciation - Building                       (1,687,500)                      (1,700,000) Equipment                          800,000                           250,000 Accumulated Depreciation…
Corvus Company has gained control over the operations of Glaive Corporation by acquiring 75% of its outstanding capital stock for P4,650,000. This amount includes a control premium of P225,000. Data from the balance sheets of the two entities included the following amounts as of the date of acquisition: Corvus Company Glaive Corporation Cash                        1,012,500                           800,000 Accounts Receivable, net                        2,770,000                           675,000 Inventory                        1,600,000                        1,200,000 Land                        3,000,000                        2,400,000 Building                        6,750,000                        3,400,000 Accumulated Depreciation - Building                       (1,687,500)                      (1,700,000) Equipment                          800,000                           250,000 Accumulated Depreciation…
Corvus Company has gained control over the operations of Glaive Corporation by acquiring 75% of its outstanding capital stock for P4,650,000. This amount includes a control premium of P225,000. Data from the balance sheets of the two entities included the following amounts as of the date of acquisition: Corvus Company Glaive Corporation Cash 1,012,500 800,000 Accounts Receivable, net 2,770,000 675,000 Inventory 1,600,000 1,200,000 Land 3,000,000 2,400,000 Building 6,750,000 3,400,000 Accumulated Depreciation - Building (1,687,500) (1,700,000) Equipment 800,000 250,000 Accumulated Depreciation…
Pab Corporation decided to establish Sollon Company as a wholly owned subsidiary by transferring some of its existing assets and liabilities to the new entity. In exchange, Sollon issued Pab 35,000 shares of $7 par value common stock. The following information is provided on the assets and accounts payable transferred: Cost Book Value Fair Value Cash $ 32,000 $ 32,000 $ 32,000 Inventory 83,000 83,000 83,000 Land 69,000 69,000 99,000 Buildings 188,000 147,000 249,000 Equipment 95,000 74,000 123,000 Accounts Payable 58,000 58,000 58,000 Required: Prepare the journal entry that Pab recorded for the transfer of assets and accounts payable to Sollon Prepare the journal entry that Sollon recorded for the receipt of assets and accounts payable from Pab.
On May 31, 2011, Armstrong Company paid P3,500,000 to acquire all of the common stock of Hall Corporation, which became a division of Armstrong. Hall reported the following balance sheet at the time of the acquisition: Current assets P900,000 Current liabilities P600,000 Noncurrent assets 2,700,000 Long-term liabilities 500,000 Stockholders’ equity 2,500,000 Total liabilities and Total assets P3,600,000 stockholders’ equity P3,600,000 It was determined at the date of the purchase that the fair value of the identifiable net assets of Hall was P2,800,000. At December 31, 2011, Hall reports the following balance sheet information: Current assets P800,000 Noncurrent assets (including goodwill…
On January 1, 2009, BANG BANG Co. purchased 80% of BANGITY BANG Co.'s outstanding stock for $620,000. At that date, all of BANGITY BANG's assets and liabilities had market values approximately equal to their book values and no goodwill was included in the purchase price. The following information was available for 2009: Income from own operations of Parent-$150,000 Operating Loss of Subsidiary-$20,000 Dividends paid in 2013 by parent-$75,000 Dividends paid by Subsidiary to Parent-$12,000. On July 1 ,2009, there was a downstream sale of equipment at a gain of $25,000. The equipment is expected to have a remaining useful life of 10 years from the date of sale. Also, on January 1, 2009, there was an upstream sale of furniture at a loss of $7,500. The furniture is expected to have a useful life of five years from the date of sale. Non-controlling interest is measured at fair value. Determine the consolidated net income attributable to the parent shareholders' equity.
On January 1, 2013, BAZINGA Co. purchased 80% of MEEMAW Co.'s outstanding stock for $62,000. At that date, all of MEEMAW's assets and liabilities had market values approximately equal to their book values and no goodwill was included in the purchase price. The following information was available for 2013: Income from own operations of Parent-$15,000 Operating Loss of Subsidiary-$2,000 Dividends paid in 2013 by parent-$7,500 Dividends paid by Subsidiary to Parent-$1,200. On July 1 ,2013, there was a downstream sale of equipment at a gain of $2,500. The equipment is expected to have a remaining useful life of 10 years from the date of sale. Also, on January 1, 2013, there was an upstream sale of furniture at a loss of $750. The furniture is expected to have a useful life of five years from the date of sale. Non-controlling interest is measured at fair value. Determine the consolidated net income attributable to the parent shareholders' equity.
Sailor Company's has brought the entity from previous owners through a leverage management buy-in (MBI). The company incurred a total transaction cost related to the MBI in the amount of P5,000,000 which was broken into the following specific costs: P1,000,000 related to the issue of own equity instrument, P1,500,000 related to the issue of debt instrument and P2,500,000 for the consultants and lawyers fees. The management proposes to capitalize the P5,000,000 as intangible asset. What amount should the company recognize as an intangible asset?

SEE MORE QUESTIONS

Recommended textbooks for you

Auditing: A Risk Based-Approach to Conducting a Q…

Accounting

ISBN:

9781305080577

Author:

Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:

South-Western College Pub