On January 1, 20X2, Plend Corporation acquired all of Stork Corporation's assets and liabilities by issuing shares of its common stock. Partial balance sheet data for the companies prior to the business combination and immediately following the combination are as follows: Plend CorporationStork CorporationCombined EntityBook ValueBook ValueAssets Cash$ 52,000$ 22,000$ 74,000Accounts Receivable72,00042,000112,000Inventory62,00047,000120,000Buildings and Equipment (net)312,000122,000454,000Goodwill ?Total Assets$ 498,000$ 233,000$ ?Liabilities and Equities Accounts Payable$ 44,000$ 26,000$ 70,000Bonds Payable162,00082,000244,000Bond Premium6,000 6,000Common Stock, $5 par112,00052,000139,500Additional Paid-In Capital77,00040,000335,500Retained Earnings97,00033,000?Total Liabilities and Equities$ 498,000$ 233,000$ ?Required:What number of shares did Plend issue to acquire Stork’s assets and liabilities?What was the total market value of the shares issued by Plend?What was the fair value of the inventory held by Stork at the date of combination?What was the fair value of the identifiable net assets held by Stork at the date of combination?What amount of goodwill, if any, will be reported by the combined entity immediately following the combination?What balance in retained earnings will the combined entity report immediately following the combination?If the depreciable assets held by Stork had an average remaining life of 10 years at the date of acquisition, what amount of depreciation expense will be reported on those assets in 20X2?

The question is based on the concept of Financial Accounting. When the net asset assets are acquired…

Answered: On January 1, 20X2, Plend Corporation…

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

ChapterA2: Investments

Section: Chapter Questions

Problem 25E

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	Plend Corporation	Stork Corporation	Combined Entity
Assets
Cash	$ 52,000	$ 22,000	$ 74,000
Accounts Receivable	72,000	42,000	112,000
Inventory	62,000	47,000	120,000
Buildings and Equipment (net)	312,000	122,000	454,000
Goodwill			?
Total Assets	$ 498,000	$ 233,000	$ ?
Liabilities and Equities
Accounts Payable	$ 44,000	$ 26,000	$ 70,000
Bonds Payable	162,000	82,000	244,000
Bond Premium	6,000		6,000
Common Stock, $5 par	112,000	52,000	139,500
Additional Paid-In Capital	77,000	40,000	335,500
Retained Earnings	97,000	33,000	?
Total Liabilities and Equities	$ 498,000	$ 233,000	$ ?

Required:

What number of shares did Plend issue to acquire Stork’s assets and liabilities?
What was the total market value of the shares issued by Plend?
What was the fair value of the inventory held by Stork at the date of combination?
What was the fair value of the identifiable net assets held by Stork at the date of combination?
What amount of goodwill, if any, will be reported by the combined entity immediately following the combination?
What balance in retained earnings will the combined entity report immediately following the combination?
If the depreciable assets held by Stork had an average remaining life of 10 years at the date of acquisition, what amount of depreciation expense will be reported on those assets in 20X2?

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	Plend Corporation	Stork Corporation	Combined Entity
Book Value	Book Value
Assets
Cash	$ 52,000	$ 22,000	$ 74,000
Accounts Receivable	72,000	42,000	112,000
Inventory	62,000	47,000	120,000
Buildings and Equipment (net)	312,000	122,000	454,000
Goodwill			?
Total Assets	$ 498,000	$ 233,000	$ ?
Liabilities and Equities
Accounts Payable	$ 44,000	$ 26,000	$ 70,000
Bonds Payable	162,000	82,000	244,000
Bond Premium	6,000		6,000
Common Stock, $5 par	112,000	52,000	139,500
Additional Paid-In Capital	77,000	40,000	335,500
Retained Earnings	97,000	33,000	?
Total Liabilities and Equities	$ 498,000	$ 233,000	$ ?