89. Flynn acquires 100 percent of the outstanding voting shares of Macek
Company on January 1, 20X1. To obtain these shares, Flynn pays $400 cash (in
thousands) and issues 10,000 shares of $20 par value common stock on this
date. Flynn’s stock had a fair value of $36 per share on that date. Flynn also pays
$15 (in thousands) to a local investment firm for arranging the acquisition. An
additional $10 (in thousands) was paid by Flynn in stock issuance costs.
The book values for both Flynn and Macek as of January 1, 20X1 follow. The fair
value of each of Flynn and Macek accounts is also included. In addition, Macek
holds a fully amortized trademark that still retains a $40 (in thousands) value.
The figures below are in thousands
. Any related question also is in thousands.
Assuming the combination is accounted for as a purchase, what amount will be
reported for consolidated retained earnings?
90. Flynn acquires 100 percent of the outstanding voting shares of Macek
Company on January 1, 20X1. To obtain these shares, Flynn pays $400 cash (in
thousands) and issues 10,000 shares of $20 par value common stock on this
date. Flynn’s stock had a fair value of $36 per share on that date. Flynn also pays
$15 (in thousands) to a local investment firm for arranging the acquisition. An
additional $10 (in thousands) was paid by Flynn in stock issuance costs.
The book values for both Flynn and Macek as of January 1, 20X1 follow. The fair
value of each of Flynn and Macek accounts is also included. In addition, Macek
holds a fully amortized trademark that still retains a $40 (in thousands) value.
The figures below are in thousands
. Any related question also is in thousands.
What amount will be reported for consolidated retained earnings?
91. Flynn acquires 100 percent of the outstanding voting shares of Macek
Company on January 1, 20X1. To obtain these shares, Flynn pays $400 cash (in
thousands) and issues 10,000 shares of $20 par value common stock on this
date. Flynn’s stock had a fair value of $36 per share on that date. Flynn also pays
$15 (in thousands) to a local investment firm for arranging the acquisition. An
additional $10 (in thousands) was paid by Flynn in stock issuance costs.
The book values for both Flynn and Macek as of January 1, 20X1 follow. The fair
value of each of Flynn and Macek accounts is also included. In addition, Macek
holds a fully amortized trademark that still retains a $40 (in thousands) value.
The figures below are in thousands
. Any related question also is in thousands.
What amount will be reported for consolidated additional paid-in capital?
92. Flynn acquires 100 percent of the outstanding voting shares of Macek
Company on January 1, 20X1. To obtain these shares, Flynn pays $400 cash (in
thousands) and issues 10,000 shares of $20 par value common stock on this
date. Flynn’s stock had a fair value of $36 per share on that date. Flynn also pays
$15 (in thousands) to a local investment firm for arranging the acquisition. An
additional $10 (in thousands) was paid by Flynn in stock issuance costs.
The book values for both Flynn and Macek as of January 1, 20X1 follow. The fair
value of each of Flynn and Macek accounts is also included. In addition, Macek
holds a fully amortized trademark that still retains a $40 (in thousands) value.
The figures below are in thousands
. Any related question also is in thousands.
What amount will be reported for consolidated cash after the acquisition is
completed?
93. What term is used to refer to a business combination in which only one of
the original companies continues to exist?
94. How are stock issuance costs accounted for in an acquisition business
combination?
95. What is the primary difference between recording an acquisition when the
subsidiary is dissolved and when separate incorporation is maintained?
96. How are direct combination costs accounted for in an acquisition
transaction?
97. Peterman Co. owns 55% of Samson Co. Under what circumstances would
Peterman
not
be required to prepare consolidated financial statements?
98. How would you account for in-process research and development
acquired in a business combination accounted for as an acquisition?
99. Elon Corp. obtained all of the common stock of Finley Co., paying slightly
less than the fair value of Finley’s net assets acquired. How should the
difference between the consideration transferred and the fair value of the net
assets be treated if the transaction is accounted for as an acquisition?
100. For acquisition accounting, why are assets and liabilities of the subsidiary
consolidated at fair value?
101. Goodwill is often acquired as part of a business combination. Why, when
separate incorporation is maintained, does Goodwill not appear on the Parent
company’s trial balance as a separate account?
102. How are direct combination costs, contingent consideration, and a bargain
purchase reflected in recording an acquisition transaction?
103. How is contingent consideration accounted for in an acquisition business
combination transaction?
104. How are bargain purchases accounted for in an acquisition business
transaction?
105. Describe the accounting for direct costs, indirect costs, and issuance
costs under the acquisition method of accounting for a business combination.
106. What is the difference in consolidated results between a business
combination whereby the acquired company is dissolved, and a business
combination whereby separate incorporation is maintained?
107. Bale Co. acquired Silo Inc. on December 31, 20X1, in an acquisition
business combination transaction. Bale’s net income for the year was
$1,400,000, while Silo had net income of $400,000 earned evenly during the year.
Bale paid $100,000 in direct combination costs, $50,000 in indirect costs, and
$30,000 in stock issue costs to effect the combination.
Required:
What is consolidated net income for 20X1?
108. Fine Co. issued its common stock in exchange for the common stock of
Dandy Corp. in an acquisition. At the date of the combination, Fine had land with
a book value of $480,000 and a fair value of $620,000. Dandy had land with a
book value of $170,000 and a fair value of $190,000.
Required:
What was the consolidated balance for Land in a consolidated balance sheet
prepared at the date of the acquisition combination?
109. Jernigan Corp. had the following account balances at 12/1/10:
Several of Jernigan’s accounts have fair values that differ from book value. The
fair values are: Land — $480,000; Building — $720,000; Inventory — $336,000;
and Liabilities — $396,000.
Inglewood Inc. acquired all of the outstanding common shares of Jernigan by
issuing 20,000 shares of common stock having a $6 par value
,
but a $66 fair
value. Stock issuance costs amounted to $12,000.
Required:
Prepare a fair value allocation and goodwill schedule at the date of the
acquisition.