Question On June 30, 2015, Wisconsin, Inc., issued $200,200 in debt and 19,300 n
ID: 2488240 • Letter: Q
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On June 30, 2015, Wisconsin, Inc., issued $200,200 in debt and 19,300 new shares of its $10 par value stock to Badger Company owners in exchange for all of the outstanding shares of that company. Wisconsin shares had a fair value of $40 per share. Prior to the combination, the financial statements for Wisconsin and Badger for the six-month period ending June 30, 2015, were as follows:
Note: Parentheses indicate a credit balance.
Wisconsin also paid $36,200 to a broker for arranging the transaction. In addition, Wisconsin paid $47,800 in stock issuance costs. Badger’s equipment was actually worth $780,000, but its patented technology was valued at only $299,200.
What are the consolidated balances for the following accounts? (Input all amounts as positive values.)
Net Income 281,800
Retained Earnings 1/1/15 810,000
Patented Technology 1,227,200
Goodwill
Liabilities 1,243,200
Common Stock 553,000
Additional Paid-In Capital 801,200
Looking for consolidated balance for Goodwill, Homework answer matches the other amounts.
Can you please go through step by step how to calculate the goodwilll
Wisconsin Badger Revenues $ (1,050,000 ) $ (402,000) Expenses 732,000 293,000 Net income $ (318,000 ) $ (109,000) Retained earnings, 1/1 $ (810,000 ) $ (223,000) Net income (318,000 ) (109,000) Dividends declared 103,000 0 Retained earnings, 6/30 $ (1,025,000 ) $ (332,000) Cash $ 72,000 $ 86,000 Receivables and inventory 460,000 252,000 Patented technology (net) 928,000 328,000 Equipment (net) 726,000 648,000 Total assets $ 2,186,000 $ 1,314,000 Liabilities $ (531,000 ) $ (512,000) Common stock (360,000 ) (200,000) Additional paid-in capital (270,000 ) (270,000) Retained earnings (1,025,000 ) (332,000) Total liabilities and equities $ (2,186,000 ) $ (1,314,000)Explanation / Answer
Consideration paid for acquisition
= Fair value of common stock issued + Value of debt
= (19,300 x $40) + $200,200
= $972,200
Book value of Company B
= Common stock + Additional paid in capital + Retained earnings
= $200,000 + $270,000 + $332,000
= $802,000
Undervaluation of equipment = $780,000 - $648,000 = $132,000
Overvaluation of patented technology = $328,000 - $299,200 = $27,800
Fair value of Company B
= Book value + Overvaluation of equipment - Undervaluation of patented technology
= $802,000 + $132,000 - $27,800
= $906,200
Amount paid in excess of fair value = $972,200 - $906,200 = $66,000
Therefore, balance of Goodwill account is $66,000.
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