Question: Purchased Goodwill Consider the following balance sheets (in millions):
Cloud Software paid $300 million to Tron stockholders for all their stock. The fair value of the plant assets of Tron is $150 million. The fair value of cash and inventories is equal to their carrying amounts. Cloud and Tron still keep separate books.
1. Prepare a tabulation showing the balance sheets of Cloud, of Tron, Intercompany Eliminations, and Consolidated Balances immediately after the acquisition.
2. Suppose only $100 million rather than $150 million of the total purchase price of $300 million could be logically assigned to the plant assets. How would the consolidated accounts be affected?
3. Refer to the facts in number 1. Suppose Cloud had paid $340 million rather than $300 million. State how your tabulation in number 1 would change.