On January 1, 2014, Innovus, Inc., acquired 100 percent of the common stock of ChipTech Company for $670,000 in cash and other fair-value consideration. ChipTech's fair value was allocated among its net assets as CPA skills follows: Fair value of consideration transferred for ChipTech Book value of ChipTech: Common stock and Additional Paid-in Capital (APIC) Retained earnings $670,000 $130,000 370,000 500,000 Excess fair value over book value to 170,000 Trademark (10-year remaining life) Existing technology (5-year remaining life) $ 40,000 80,000 120,000 Goodwill 50,000 The December 31, 2015, trial balances for the parent and subsidiary follow (there were no intra-entity payables on that date): ChipTech Innovus S (990,000) 500,000 100,000 55,000 (40,000) S(210,000) 90,000 5,000 18,000 -0- Ravenues Cost of goods sold Depreciation expense Amortization expense Dividend income S(97,000) S (375,000) Net income Retained earmings 1/1/15 S(1,555,000) 375,000) 250,000 $(450,000) (97,000) 40,000 Net income Dividends dedared Retained eamings 12/31/15 S(1,680,000) $(507,000) Currant assets Investment in ChipTech Equipment (net) Trademark Existing technology Goodwill S 960,000 670,000 765,000 235,000 355,000 225,000 100,000 45,000 450,000 0 S 3,080,000 S (780,000) (500,000) (120,000) (1,680,000) Total assets 725,000 Liabilities Common stock Additional paid-in capital Retained eamings 12/31/15 (88.000) (100,000) (30,000) (507,000) Total liabilities and equity $(3,080,000) $725,000) Required a. Using Excel, compute consolidated balances for Innovus and ChipTech Either use a worksheet approach or compute the balances directly b. Prepare a second spreadsheet that shows a 2015 impairment loss for the entire amount of goodwill from the ChipTech acquisition.
On January 1, 2014, Innovus, Inc., acquired 100 percent of the common stock of ChipTech Company for $670,000 in cash and other fair-value consideration. ChipTech's fair value was allocated among its net assets as CPA skills follows: Fair value of consideration transferred for ChipTech Book value of ChipTech: Common stock and Additional Paid-in Capital (APIC) Retained earnings $670,000 $130,000 370,000 500,000 Excess fair value over book value to 170,000 Trademark (10-year remaining life) Existing technology (5-year remaining life) $ 40,000 80,000 120,000 Goodwill 50,000 The December 31, 2015, trial balances for the parent and subsidiary follow (there were no intra-entity payables on that date): ChipTech Innovus S (990,000) 500,000 100,000 55,000 (40,000) S(210,000) 90,000 5,000 18,000 -0- Ravenues Cost of goods sold Depreciation expense Amortization expense Dividend income S(97,000) S (375,000) Net income Retained earmings 1/1/15 S(1,555,000) 375,000) 250,000 $(450,000) (97,000) 40,000 Net income Dividends dedared Retained eamings 12/31/15 S(1,680,000) $(507,000) Currant assets Investment in ChipTech Equipment (net) Trademark Existing technology Goodwill S 960,000 670,000 765,000 235,000 355,000 225,000 100,000 45,000 450,000 0 S 3,080,000 S (780,000) (500,000) (120,000) (1,680,000) Total assets 725,000 Liabilities Common stock Additional paid-in capital Retained eamings 12/31/15 (88.000) (100,000) (30,000) (507,000) Total liabilities and equity $(3,080,000) $725,000) Required a. Using Excel, compute consolidated balances for Innovus and ChipTech Either use a worksheet approach or compute the balances directly b. Prepare a second spreadsheet that shows a 2015 impairment loss for the entire amount of goodwill from the ChipTech acquisition.
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter13: Investments And Long-term Receivables
Section: Chapter Questions
Problem 8MC
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Transcribed Image Text:On January 1, 2014, Innovus, Inc., acquired 100 percent of the common
stock of ChipTech Company for $670,000 in cash and other fair-value
consideration. ChipTech's fair value was allocated among its net assets as
CPA
skills
follows:
Fair value of consideration transferred for ChipTech
Book value of ChipTech:
Common stock and Additional Paid-in Capital (APIC)
Retained earnings
$670,000
$130,000
370,000
500,000
Excess fair value over book value to
170,000
Trademark (10-year remaining life)
Existing technology (5-year remaining life)
$ 40,000
80,000
120,000
Goodwill
50,000
The December 31, 2015, trial balances for the parent and subsidiary follow
(there were no intra-entity payables on that date):
ChipTech
Innovus
S (990,000)
500,000
100,000
55,000
(40,000)
S(210,000)
90,000
5,000
18,000
-0-
Ravenues
Cost of goods sold
Depreciation expense
Amortization expense
Dividend income
S(97,000)
S (375,000)
Net income
Retained earmings 1/1/15
S(1,555,000)
375,000)
250,000
$(450,000)
(97,000)
40,000
Net income
Dividends dedared
Retained eamings 12/31/15
S(1,680,000)
$(507,000)
Currant assets
Investment in ChipTech
Equipment (net)
Trademark
Existing technology
Goodwill
S 960,000
670,000
765,000
235,000
355,000
225,000
100,000
45,000
450,000
0
S 3,080,000
S (780,000)
(500,000)
(120,000)
(1,680,000)
Total assets
725,000
Liabilities
Common stock
Additional paid-in capital
Retained eamings 12/31/15
(88.000)
(100,000)
(30,000)
(507,000)
Total liabilities and equity
$(3,080,000)
$725,000)
Required
a. Using Excel, compute consolidated balances for Innovus and ChipTech
Either use a worksheet approach or compute the balances directly
b. Prepare a second spreadsheet that shows a 2015 impairment loss for
the entire amount of goodwill from the ChipTech acquisition.
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