FUNDAMENTALS OF ADVANCED ACCOUNTING >I
6th Edition
ISBN: 9781307007350
Author: Hoyle
Publisher: MCG/CREATE
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter 2, Problem 30P
SafeData Corporation has the following account balances and respective fair values on June 30:
| Book Values | Fair Values | |
| Receivables | $ 80,000 | $80,000 |
| Patented technology | 100,000 | 700,000 |
| Customer relationships | –0– | 500,000 |
| In-process research and development | –0– | 300,000 |
| Liabilities | (400,000) | (400,000) |
| Common stock | (100,000) | |
| Additional paid-in capital | (300,000) | |
| 700,000 | ||
| Revenues | (300,000) | |
| Expenses | 220,000 |
Privacy First, Inc., obtained all of the outstanding shares of SafeData on June 30 by issuing 20,000 shares of common stock having a $1 par value but a $75 fair value. Privacy First incurred $10,000 in stock issuance costs and paid $75,000 to an investment banking firm for its assistance in arranging the combination. In negotiating the final terms of the deal, Privacy First also agrees to pay $100,000 to Safe Data’s former owners if it achieves certain revenue goals in the next two years. Privacy First estimates the probability adjusted present value of this contingent performance obligation at $30,000.
- a. What is the fair value of the consideration transferred in this combination?
- b. How should the stock issuance costs appear in Privacy First’s postcombination financial statements?
- c. How should Privacy First account for the fee paid to the investment bank?
- d. How does the issuance of these shares affect the stockholders’ equity accounts of Privacy First, the parent?
- e. How is the fair value of the consideration transferred in the combination allocated among the assets acquired and the liabilities assumed?
- f. What is the effect of SafeData’s revenues and expenses on consolidated totals? Why?
- g. What is the effect of SafeData’s Common Stock and Additional Paid-In Capital balances on consolidated totals?
h. If Privacy First’s stock had been worth only $50 per share rather than $75, how would the consolidation of SafeData’s assets and liabilities have been affected?
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
SafeData Corporation has the following account balances and respective fair values on June 30:
Book Values
Fair Values
Receivables
$ 80,000
$ 80,000
Patented technology
100,000
700,000
Customer relationships
–0–
500,000
In-process research and development
–0–
300,000
Liabilities
(400,000)
(400,000)
Common stock
(100,000)
Additional paid-in capital
(300,000)
Retained earnings deficit, 1/1
700,000
Revenues
(300,000)
Expenses
220,000
Privacy First, Inc., obtained all of the outstanding shares of SafeData on June 30 by issuing 20,000 shares of common stock having a $1 par value but a $75 fair value. Privacy First incurred $10,000 in stock issuance costs and paid $75,000 to an investment banking firm for its assistance in arranging the combination. In negotiating the final terms of the deal, Privacy First also agrees to pay $100,000 to SafeData’s former owners if it achieves certain…
On May 1, Soriano Co. reported the following account balances along with their estimated fair values:
Carrying Amount Fair Value
Receivables . . . . . . . . . . . . . . . . . . . . . . . $ 90,000 $ 90,000
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . 75,000 75,000
Copyrights . . . . . . . . . . . . . . . . . . . . . . . . 125,000 480,000
Patented technology . . . . . . . . . . . . . . . 825,000 700,000
Total assets . . . . . . . . . . . . . . . . . . . . . . . $1,115,000 $1,345,000
Current liabilities . . . . . . . . . . . . . . . . . . . $ 160,000 $ 160,000
Long-term liabilities . . . . . . . . . . . . . . . . 645,000 635,000
Common stock . . . . . . . . . . . . . . . . . . . . 100,000
Retained earnings . . . . . . . . . . . . . . . . . . 210,000
Total liabilities and equities . . . . . . . . . . $1,115,000
On that day, Zambrano paid cash to acquire all of the assets and liabilities of Soriano, which will cease to exist as a separate entity. To facilitate the…
On May 1, Soriano Co. reported the following account balances along with their estimated fair values:
Carrying Amount
Fair Value
Receivables
$
219,000
$
219,000
Inventory
92,000
92,000
Copyrights
152,000
533,000
Patented technology
832,000
677,000
Total assets
$
1,295,000
$
1,521,000
Current liabilities
$
256,000
$
256,000
Long-term liabilities
685,000
673,000
Common stock
100,000
Retained earnings
254,000
Total liabilities and equities
$
1,295,000
On that day, Zambrano paid cash to acquire all of the assets and liabilities of Soriano, which will cease to exist as a separate entity. To facilitate the merger, Zambrano also paid $101,500 to an investment banking firm.
The following information was also available:
Zambrano further agreed to pay an extra $81,400 to the former owners of Soriano only if they meet certain revenue goals during the…
Chapter 2 Solutions
FUNDAMENTALS OF ADVANCED ACCOUNTING >I
Ch. 2 - Prob. 1QCh. 2 - Prob. 2QCh. 2 - What does the term consolidated financial...Ch. 2 - Within the consolidation process, what is the...Ch. 2 - Prob. 5QCh. 2 - Prob. 6QCh. 2 - Prob. 7QCh. 2 - Prob. 8QCh. 2 - Prob. 9QCh. 2 - Prob. 10Q
Ch. 2 - Prob. 11QCh. 2 - Which of the following does not represent a...Ch. 2 - Prob. 2PCh. 2 - Prob. 3PCh. 2 - Prob. 4PCh. 2 - Prob. 5PCh. 2 - An acquired entity has a long-term operating lease...Ch. 2 - When does gain recognition accompany a business...Ch. 2 - Prob. 8PCh. 2 - Prob. 9PCh. 2 - Prob. 10PCh. 2 - On June 1, Cline Co. paid 800,000 cash for all of...Ch. 2 - On May 1, Donovan Company reported the following...Ch. 2 - Prob. 13PCh. 2 - Prob. 14PCh. 2 - Prob. 15PCh. 2 - Prob. 16PCh. 2 - On its acquisition-date consolidated balance...Ch. 2 - On its acquisition-date consolidated balance...Ch. 2 - Prob. 19PCh. 2 - The following book and fair values were available...Ch. 2 - Prob. 21PCh. 2 - Prob. 22PCh. 2 - Prob. 23PCh. 2 - Prob. 24PCh. 2 - Prob. 25PCh. 2 - Prob. 26PCh. 2 - Prob. 27PCh. 2 - Prob. 28PCh. 2 - Prob. 29PCh. 2 - SafeData Corporation has the following account...Ch. 2 - Prob. 31PCh. 2 - Prob. 32PCh. 2 - Prob. 33APCh. 2 - On February 1, Piscina Corporation completed a...Ch. 2 - Prob. 1DYSCh. 2 - Prob. 2DYSCh. 2 - Prob. 3DYS
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- On May 1, Soriano Co. reported the following account balances along with their estimated fair values: Carrying Amount Fair Value Receivables $ 188,400 $ 188,400 Inventory 76,600 76,600 Copyrights 146,000 522,000 Patented technology 864,000 646,000 Total assets $ 1,275,000 $ 1,433,000 Current liabilities $ 182,000 $ 182,000 Long-term liabilities 700,000 682,000 Common stock 100,000 Retained earnings 293,000 Total liabilities and equities $ 1,275,000 On that day, Zambrano paid cash to acquire all of the assets and liabilities of Soriano, which will cease to exist as a separate entity. To facilitate the merger, Zambrano also paid $123,000 to an investment banking firm. The following information was also available: Zambrano further agreed to pay an extra $74,000 to the former owners of Soriano only if they meet certain revenue goals during the…arrow_forwardThe following book and fair values were available for NorthStar Company as of March 1. Book value Fair value Inventory $ 630,000 $ 600,000 Land 750,000 990,000 Buildings 1,700,000 2,000,000 Customer relationships –0– 800,000 Accounts payable (80,000) (80,000) Common stock (2,000,000) Additional paid-in capital (500,000) Retained earnings, 1/1 (360,000) Revenues (420,000) Expenses 280,000 BluePrint Company pays $4,200,000 cash for all of NorthStar’s common stock in a merger, after which NorthStar will cease to exist as a separate entity. BluePrint pays $70,000 for legal fees to complete the transaction. Required: Pass the necessary journal entries in the books of BluePrint for its acquisition of NorthStar’s common stocks. please attempt if 100% sure need correct and complete answer with everything thanksarrow_forwardJune 1, Cline Co. paid $800,000 cash for all of the issued and outstanding common stock of Renn Corp. The carrying values for Renn’s assets and liabilities on June 1 follow: Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $150,000 Accounts receivable . . . . . . . . . . . . . . . . . . . 180,000 Capitalized software costs. . . . . . . . . . . . . . . 320,000 Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000 Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . (130,000) Net assets . . . . . . . . . . . . . . . . . . . . . . . . . … $620,000 On June 1, Renn’s accounts receivable had a fair value of $140,000. Additionally, Renn’s in process research and development was estimated to have a fair value of $200,000. All other items were stated at their fair values. On Cline’s June 1 consolidated balance sheet, how much is reported for goodwill? A. $320,000. B. $20,000. C. $80,000. D $120,000. E.Non of the Abovearrow_forward
- On June 1, Cline Co. paid $870,000 cash for all of the issued and outstanding common stock of Renn Corp. The carrying amounts for Renn’s assets and liabilities on June 1 follow: Cash $ 239,000 Accounts receivable 181,000 Capitalized software costs 340,000 Goodwill 103,000 Liabilities (226,000 ) Net assets $ 637,000 On June 1, Renn’s accounts receivable had a fair value of $136,000. Additionally, Renn’s in-process research and development was estimated to have a fair value of $253,000. All other items were stated at their fair values. On Cline’s June 1 consolidated balance sheet, how much is reported for goodwill? Multiple Choice $340,000. $20,000. $128,000. $83,000.arrow_forward13. On June 1, Cline Co. paid $800,000 cash for all of the issued and outstanding common stock of Renn Corp. The carrying values for Renn’s assets and liabilities on June 1 follow: Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $150,000 Accounts receivable . . . . . . . . . . . . . . . . . . . 180,000 Capitalized software costs. . . . . . . . . . . . . . . 320,000 Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000 Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . (130,000) Net assets . . . . . . . . . . . . . . . . . . . . . . . . . … $620,000 On June 1, Renn’s accounts receivable had a fair value of $140,000. Additionally, Renn’s in process research and development was estimated to have a fair value of $200,000. All other items were stated at their fair values. On Cline’s June 1 consolidated balance sheet, how much is reported for goodwill? A. $320,000. B. $120,000. C. $80,000. D. $20,000.arrow_forwardThe following book and fair values were available for Westmont Company as of March 1. Book value Fair value Inventory $ 630,000 $ 600,000 Land 750,000 990,000 Buildings 1,700,000 2,000,000 Customer relationships –0– 800,000 Accounts payable (80,000) (80,000) Common stock (2,000,000) Additional paid-in capital (500,000) Retained earnings, 1/1 (360,000) Revenues (420,000) Expenses 280,000 Arturo Company pays $4,000,000 cash and issues 20,000 shares of its $2 par value common stock (fair value of $50 per share) for all of Westmont’s common stock in a merger, after which Westmont will cease to exist as a separate entity. Stock issue costs amount to $25,000 and Arturo pays $42,000 for legal fees to complete the transaction. Required Prepare Arturo’s journal entries to record its acquisition of Westmont.arrow_forward
- On June 1, Cline Co. paid $800,000 cash for all of the issued and outstanding common stock of Renn Corp. The carrying amounts for Renn’s assets and liabilities on June 1 follow:Cash . . . . . . . . . . . . . . . . . . $150,000 Accounts receivable . . . . . . . . .180,000Capitalized software costs . . . 320,000Goodwill . . . . . . . . . . . . . . . . . 100,000Liabilities . . . . . . . . . . . . .. . . (130,000)Net assets . . . . . . . . . . . . .. . $620,000 On June 1, Renn’s accounts receivable had a fair value of $140,000. Additionally, Renn’s in-process research and development was estimated to have a fair value of $200,000. All other items were stated at their fair values. On Cline’s June 1 consolidated balance sheet, how much is reported for goodwill?arrow_forwardThe following book and fair values were available for Westmont Company as of March 1 Book Value Fair Value Inventory $ 350,000 $ 298,250 Land 820,500 1,085,250 Buildings 2,040,000 2,361,000 Customer relationships 0 871,500 Accounts payable (105,000) (105,000) Commom stock (2,000,000) Additional paid-in capital (500,000) Retained earnings 1/1 (425,500) Revenues (496,000) Expenses 316,000 Aturo pays cash of $4,380,000 to acquire Westmont. No stock is issued and…arrow_forwardOn June 1, Cline Co. paid $800,000 cash for all of the issued and outstanding common stock of Renn Corp. The carrying amounts for Renn’s assets and liabilities on June 1 follow:On June 1, Renn’s accounts receivable had a fair value of $140,000. Additionally, Renn’s in-process research and development was estimated to have a fair value of $200,000. All other items were stated at their fair values. On Cline’s June 1 consolidated balance sheet, how much is reported for goodwill? a. $320,000b. $120,000c. $80,000d. $20,000arrow_forward
- The general ledger trial balance of A Corporation includes the following statement of financial position accounts: Inventory (including inventory expected in the ordinary course of operations to be sold beyond 12 months amounting to P70,000) P110,000 Trade receivables 120,000 Prepaid insurance 8,000 Listed investments held for trading purposes at fair value 20,000 Available for sale investments 80,000 Cash and cash equivalents 30,000 Deferred tax asset 15,000 Bank overdraft 25,000 The amount that should be reported as current assets on A statement of financial position isarrow_forwardThe accounts and balances shown below are gathered from Den Company's adjusted trial balance. Wages Payable P250,000 Cash 137,000 Bonds Payable 600,000 Dividends Payable 140,000 Prepaid Expenses 126,000 Inventory 802,000 Longterm Funds 525,000 Financial Assets at Fair Value Through Profit or Loss 135,000 Accumulated Depreciation - Prop., Plant & Equipment 400,000 Financial Assets At Fair Value Through Other Comprehensive Income 300,000 Discount on Bonds Payable 48,000 Investment in Associates 1,020,000 Taxes Payable 228,000 Accounts Payable 248,000 Accounts Receivable 360,000 Property, Plant and Equipment 1,200,000 Goodwill 450,000 Advances from Affiliated Companies 900,000 Den Company should report total current assets of_______.arrow_forwardThe following book and fair values were available for Westmont Company as of March 1. Book Value Fair Value Inventory $ 200,500 $ 167,000 Land 817,500 1,097,250 Buildings 2,175,000 2,506,500 Customer relationships 0 860,250 Accounts payable (87,000 ) (87,000 ) Common stock (2,000,000 ) Additional paid-in capital (500,000 ) Retained earnings, 1/1 (431,500 ) Revenues (478,500 ) Expenses 304,000 Arturo Company pays $3,650,000 cash and issues 22,500 shares of its $2 par value common stock (fair value of $50 per share) for all of Westmont’s common stock in a merger, after which Westmont will cease to exist as a separate entity. Stock issue costs amount to $33,600 and Arturo pays $49,300 for legal fees to complete the transaction. Prepare Arturo’s journal entries to record its acquisition of Westmont. (If no entry is required for a transaction/event, select "No journal entry…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Principles of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College
Principles of Accounting Volume 2
Accounting
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax College
How To Analyze an Income Statement; Author: Daniel Pronk;https://www.youtube.com/watch?v=uVHGgSXtQmE;License: Standard Youtube License