Question: King's Road recently acquired all of Oxford Corporation's stock and is now consolidating the financial data of this new subsidiary. King's Road paid a total of $1,030,000 for Oxford, which has the following accounts:
|
Fair Value |
Tax Basis |
| Accounts receivable |
$ |
144,000 |
|
$ |
144,000 |
|
| Inventory |
|
182,000 |
|
|
182,000 |
|
| Land |
|
127,000 |
|
|
127,000 |
|
| Buildings |
|
283,250 |
|
|
230,000 |
|
| Equipment |
|
298,750 |
|
|
247,000 |
|
| Liabilities |
|
(283,000) |
|
|
(283,000) |
|
|
Note: Parentheses indicate a credit balance.
a. What amount of deferred tax liability arises in the acquisition: Deferred tax liability:
b. What amounts will be used to consolidate Oxford with King's Road at the date of acquisition? (Credit balances should be indicated with minus sign.)
c. On a consolidated balance sheet prepared immediately after this takeover, how much goodwill should King's Road recognize? Assume a 30 percent effective tax rate.