7)
The balance sheets of Palisade Company and Salisbury Corporation were as
follows on December 31, 2010:
Palisade
Salisbury
Current Assets
$260,000
$120,000
Equipment-net
440,000
480,000
Buildings-net
600,000
200,000
Land
100,000
200,000
Total Assets
$1,400,000
$1,000,000
Current Liabilities
100,000
120,000
Common Stock, $5 par
1,000,000
400,000
Additional paid-in Capital
100,000
280,000
Retained Earnings
200,000
200,000
Total Liabilities and Stockholders’
equity
$1,400,000
$1,000,000
On January 1, 2011 Palisade issued 30,000
of its shares with a market value of $40 per share in exchange for all of
Salisbury’s shares, and Salisbury was dissolved. Palisade paid $20,000 to
register and issue the new common shares. It cost Palisade $50,000 in direct
combination costs. Book values equal market values except that Salisbury’s land
is worth $250,000.
Required:
Prepare a
Palisade balance sheet after the business combination on January 1, 2011.
8)
On January 2, 2011, Pilates Inc. paid $900,000 for all of the outstanding
common stock of Spinning Company, and dissolved Spinning Company. The carrying
values for Spinning Company’s assets and liabilities are recorded below.
Cash $200,000
Accounts
Receivable 220,000
Copyrights
(purchased) 400,000
Goodwill 120,000
Liabilities (180,000)
Net assets $760,000
On January 2, 2011, Spinning anticipated
collecting $185,000 of the recorded Accounts Receivable. Pilates entered into
the acquisition because Spinning had Copyrights that Pilates wished to own, and
also unrecorded patents with a fair value of $100,000.
Required:
Calculate the amount of goodwill that will
be recorded on Pilate’s balance sheet as of the date of acquisition.
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