Consolidated Balance Sheet Working Paper, Identifiable Intangibles International
ID: 2410386 • Letter: C
Question
Consolidated Balance Sheet Working Paper, Identifiable Intangibles
International Auto (IA) acquires all of the stock of Genuine Parts (GP) and reports the acquisition as a stock investment on its own books. The acquisition involves the following payments. All amounts are in thousands.
The earnings contingency, if paid, will occur three years subsequent to the acquisition. The balance sheet accounts of GP and IA, just prior to the acquisition, are as follows:
In addition to the assets reported on GP's balance sheet, the following previously unreported intangible assets are identified. Note: Some of these intangibles may not be separately capitalized per ASC Topic 805.
a. Prepare a schedule calculating the excess of acquisition cost over GP's book value, and its allocation to GP's identifiable net assets and goodwill.
When appropriate, use negative signs with your excess of fair value over book value answers (left column only). Do not use negative signs with answers in the right column.
b. Prepare a consolidation working paper to consolidate IA and GP at the date of acquisition.
Remember to use negative signs with your credit balance answers in the Dr (Cr) columns.
c. Prepare the consolidated balance sheet at the date of acquisition.
Remember to use a negative sign with your treasury stock answer.
Please answer a,b, and c because they are all part of one question.
Cash paid to GP shareholders $15,000 Cash paid to consultants and lawyers 3,600 Fair value of new IA stock issued, 1,000 shares, $6 par 108,000 Stock registration fees, paid in cash 2,700 Fair value of earnings contingency 750Explanation / Answer
2014, Amirante Corporation had pretax financial income of $168,000 and taxable income of $120,000. The difference is due to the use of different depreciation methods for tax and accounting purposes. The effective tax rate is 40%. Compute the amount to be reported as income taxes payable at December 31, 2014.
Taxable Income x Tax Rate = 120,000 x .4 = $48,000 income tax payable
Oxford Corporation began operations in 2014 and reported pretax financial income of $225,000 for the year. Oxford's tax depreciation exceeded its book depreciation by $40,000. Oxford's tax rate for 2014 and years thereafter is 30%. In its December 31, 2014, balance sheet, what amount of deferred tax liability should be reported
Excess Depreciation x Tax Rate = 12000 Deferred Tax Liability
Oxford Corporation began operations in 2014 and reported pretax financial income of $225,000 for the year. Oxford's tax depreciation exceeded its book depreciation by $40,000. Oxford's tax rate for 2014 and years thereafter is 30%. Prepare the journal entry to record the income tax expense, deferred income taxes, and income taxes payable, and show how the deferred tax liability will be classified on the December 31, 2014, balance sheet.
Dr Income Tax Expense 79500
Cr DTL 12000
Cr Income Tax Payable 67500
The $12,000 deferred tax liability should be classified as a noncurrent
liability. The balances in the deferred tax accounts should be classified in
the same manner as the related asset. Since property, plant, and equipment
is a noncurrent asset, noncurrent liability is the proper classification for the deferred tax liability.
At December 31, 2014, Suffolk Corporation had an estimated warranty liability of $105,000 for accounting purposes and $0 for tax purposes. (The warranty costs are not deductible until paid.) The effective tax rate is 40%. Compute the amount Suffolk should report as a deferred tax asset at December 31, 2014.
Excess Book to Tax difference x Tax Rate = 105,000 x .4 = 42,000 DTA
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