Advanced Accounting: FVINA, Allocation Schedule, Purchase Prices...
** Please see the attached file for the complete problem description **
Hill buys Loring on 7/1 for $400,000 by issuing 10,000 of $5 par, $40 fair value shares to Loring's existing shareholders.
(please see the attached file)
Required:
a. Calculate FVINA for this example.
b. Optional: Prepare an allocation schedule.
c. Definition of Goodwill = Purchase Price less ____________ .
d. Calculate Goodwill for this example.
e. Prepare Hill's journal entry to acquire Loring assuming acquisition of stock with no dissolution (not the elimination entries).
f. What will be the balances in Hill's Owners' Equity accounts after the acquisition?
g. Prepare the elimination entries.
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SOLUTION This solution is FREE courtesy of BrainMass!
** Please see the attachment for the complete solution **
In thousands Hill Pre- Loring Loring
Acquisition BV FV
Cash and receivables 140 60 60
Inventory 190 145 175
Patented Technology 230 180 200
Land 400 200 225
Buildings 100 75 75
Total 1,060 660 735
Liabilities (540) (360) (350)
Common Stock (300) (70)
APIC (10) (30)
Retained Earnings, 7/1 (210) (200)
Total (1,060) (660) (350)
Answer a
Cash and receivables 60
Inventory 175
Patented Technology 200
Land 225
Buildings 75
FV of Assets 735
Less: FV of Liabilities (350)
FVNIA 385
Answer b
Purchase Price $400
BVNA
Total book value of assets 660
Book value of liabilities (360)
BVNA 300
Excess to allocate $100
Allocation
Inventory 30
Patented Technology 20
Land 25
Liabilities 10
Goodwill 15
Total allocation 100
Answer c
Definition of Goodwill = Purchase Price less FVNIA
Answer d
Purchase price paid $400
FVNIA 385
Goodwill $15
Answer e
Cash and receivables.....................Dr 60
Inventory.....................................Dr 175
Patented Technology....................Dr 200
Land..........................................Dr 225
Buildings....................................Dr 75
Goodwill.....................................Dr $15
Liabilities.........................................................Cr 350
Common Stock................................................Cr 50
Additional Paid in Capital (APIC).........................Cr 350
Answer f
Before Acquisition Acquisition Change Post Acquisition
Common Stock (300) (50) (350)
APIC (10) (350) (360)
Retained Earnings, 7/1 (210) (210)
Total Equity (520) (400) (920)
Answer g
Liabilities...................................Dr 350
Common Stock...........................Dr 50
Additional Paid in Capital (APIC).....Dr 350
Cash and receivables.........................................Cr 60
Inventory.........................................................Cr 175
Patented Technology..........................................Cr 200
Land..............................................................Cr 225
Buildings........................................................Cr 75
Goodwill........................................................Cr 15
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