Question 1: Prycal Co. merges with InterBuy, Inc., and acquires several different categories of intangible assets including trademarks, a customer list, copyrights on artistic materials, agreements to receive royal-ties on leased intellectual property, and unpatented technology.
a. Describe the criteria put forth in SPAS No. 14IR for determining whether an intangible asset acquired in a business combination should be separately recognized apart from goodwill.
b. For each of the acquired intangibles listed, identify which recognition criteria (separability and legal/contractual) may or may not apply in recognizing the intangible on the acquiring firm's financial statements.
Question 2. Following arc prcacquisition financial balances for Parrot Company and Sun Company as of December 31. Also included are fair values for Sun Company accounts.
|
|
Parrot
Company
Book Values
12/31
|
Sun Company
|
|
Book Values
12/31
|
Fair Values
12/31
|
|
Cash .....................................
|
290,000
|
120,000
|
$ 120,000
|
|
Receivables ......................................
|
220,000
|
300,000
|
300,000
|
|
Inventory ..............................
|
410,000
|
210,000
|
260,000
|
|
Land .....................................
|
600,000
|
130,000
|
110,000
|
|
Building and equipment (net)
|
600,000
|
270,000
|
330,000
|
|
Franchise agreements ............
|
220,000
|
190,000
|
220,000
|
|
Accounts payable ..................
|
(190,000)
|
(120,000)
|
(120,000)
|
|
Accrued expenses ..................
|
(90,000)
|
(30,000)
|
(30,000)
|
|
Long-term liabilities ...............
|
(900,000)
|
(510,000)
|
(510,000)
|
|
Common stock-420 par value
|
(660,000)
|
|
|
|
Common stock-35 par value .
|
|
(210,000)
|
|
|
Additional paid-in capital .......
|
(70,000)
|
(90,000)
|
|
|
Retained earnings, 1/1 ..........
|
(390,000)
|
(240,000)
|
|
|
Revenues ..........................................
|
(960,000)
|
(330,000)
|
|
|
Expenses ...............................
|
920,000
|
310,000
|
|
On December 31, Parrot acquires Sun's outstanding stock by paying $360,000 in cash and issuing 10,000 shares of its own common stock with a value of $40 per share. Parrot paid legal and account¬ing fees of $20,000 as well as $5,000 in stock issuance costs.
In the following situations, determine the value that would be shown in consolidated financial state¬ments for each of the accounts listed.
Accounts
Inventory Revenues
Land Additional paid-in capital
Buildings and equipment Expenses
Franchise agreements Retained earnings, 1/1
Goodwill
Question 3: Winston has the following account balances as of February 1.
|
Inventory ................................................................
|
$ 600,000
|
|
Land ......................................................................
|
500,000
|
|
Buildings (net) (valued at $1,000,000) ..................
|
900,000
|
|
Common stock ($10 par value) .............................
|
(800,000)
|
|
Retained earnings 1/1 ............................................................
|
(1,100,000)
|
|
Revenues ..............................................................
|
(600,000)
|
|
Expenses ...............................................................
|
500,000
|
Arlington pays $1.4 million cash and issues 10,000 shares of its $30 par value common stock (val¬ued at $80 per share) for all of Winston's outstanding stock. Stock issuance costs amount to $30,000. Prior to recording these newly issued shares, Arlington reports a Common Stock account of $900,000 and Additional Paid-1n Capital of $500,000. For each of the following accounts, determine what balance would be included in a February 1 consolidation.
a. Goodwill.
b. Expenses.
c. Retained Earnings, 1/1.
d. Buildings.