Blackfish Company purchases 100% of Tautog Company on Jan 1, 2018 for $1,200,000
ID: 2335909 • Letter: B
Question
Blackfish Company purchases 100% of Tautog Company on Jan 1, 2018 for $1,200,000 in cash. On the day of the purchase, Tautog had the following net assets:
Book Value Fair Value Life
Cash, received $100,000 $100,000
Equipment 375,000 450,000 3 years
Land 200,000 150,000
Building (net) 500,000 580,000 5 years
Payable $300,000 $200,000 1 year
Blackfish Net Assets $875,000 1,080,000
Answer the following:
A. Prepare a schedule showing how to allocate the difference in fair value given up by Blackfish and what is received from Tautog
B. Determine the amount of excess amortization for 2018.
C. Assume that the purchase was a merger.
D. Record the purchase on the books of Blackfish
Explanation / Answer
Requirement 1: Particulars Amount Fair value of consideration paid $1,200,000 Less: Book value of net assets acquired $875,000 Excess of fair value over book value $325,000 Particulars Book Value Fair Value Allocation Less: Allocation of excess fair value A B (BA) Equipment $375,000 $450,000 $75,000 Land $200,000 $150,000 ($50,000) Buildings $500,000 $580,000 $80,000 Payables ($300,000) ($200,000) $100,000 Excess fair value allocated to identifiable net assets $205,000 Add: Allocated to goodwill ($1,200,000 $1,080,000) $120,000 Total excess of fair value over book value $325,000 Requirement 2: Annual amortization of excess fair value Useful life Amortization Equipment ($450,000 $375,000) $75,000 3 $25,000 Buildings ($580,000 $500,000) $80,000 5 $16,000 Payables ($200,000 $300,000) ($100,000) 1 ($100,000) Total ($59,000) Requirement 3 and 4: Account Title Debit Credit Cash $100,000 Equipment $450,000 Land $150,000 Buildings $580,000 Goodwill $120,000 Payables $200,000 Cash $1,200,000
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