Company A purchases all assets and liabilities of Company B for 2.3million. Comp

Question

Company A purchases all assets and liabilities of Company B for 2.3million.

Company B, has 100k in PPE, Cash of 500k, Liabilities 400k all at FMV.

Included in the 2.3 million is a highly likely contingency payment of 500k to be paid out in year 2.

Intangibles are valued at 700k on the day of the close.

Company A will pay 1.7million cash on close.

Company B will run independently from Company A.

Company A will report consolidated financials.

Questions to answer are:

1.            What is the goodwill value for Company B?

2.            What is the acquisition entry for the company A?

3.            What is the acquisition entry for Company B?

4.            What are the elimination entries for consolidation?

Explanation / Answer

Question 1 Property 100000 Cash 500000 Intangibles 700000 Total 1300000 Payment by cash 1700000 goodwill 400000 Question 2 Property plant and Equipment 100000 Cash 500000 Intangibles 700000 Goodwill 400000 Cash 1700000 Question 3 Cash 1700000 Property plant and Equipment 100000 Cash 500000 Intangibles 700000 Goodwill 400000 Liabilities 400000 Contingency Liabilities 500000 Owners Equity 800000 Cash 1700000 Question 4 Cash once debited for 500 and cash Credited 1700000, can be reduced to Cash credit for 1200000

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.