(Solution) Allocation of Purchase Price to Various Assets and Liabilities Company S has no long-term marketable securities. Assume the following scenarios: > Snapessays.com


(Solution) Allocation of Purchase Price to Various Assets and Liabilities Company S has no long-term marketable securities. Assume the following scenarios:


Allocation of Purchase Price to Various Assets and Liabilities

 

Company S has no long-term marketable securities. Assume the following scenarios:

 

Case A

 

Assume that P Company paid $130,000 cash for 100% of the net assets of S Company.

 

S Company

 

Assets

 

Current Assets Long-lived Assets Liabilities Net Assets

 

Book Value $15,000 $85,000 $20,000 $80,000

 

Fair Value 20,000 130,000 30,000 120,000

 

Case B

 

Assume that P Company paid $110,000 cash for 100% of the net assets of S Company.

 

S Company

 

Assets

 

Current Assets Long-lived Assets Liabilities Net Assets

 

Book Value $15,000 $85,000 $20,000 $80,000

 

Fair Value 30,000 80,000 20,000 90,000

 

Case C

 

Assume that P Company paid $15,000 cash for 100% of the net assets of S Company.

 

S Company

 

Assets

 

Current Assets Long-lived Assets Liabilities Net Assets

 

Book Value $15,000 $85,000 $20,000 $80,000

 

Fair Value 20,000 40,000 40,000 20,000

 

Required:

 

Complete the following schedule by listing the amount that would be recorded on P’s books.

 

Assets

 

Retained Earnings

 

Goodwill Current Assets Long-lived Assets Liabilities (Gain in Income Statement)

 

Case A

 

Case B

 

Case C

 


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This question was answered on: Sep 21, 2023

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