On July 1, 2011, Faber Enterprises acquired Anns Tool Company. Prior to the merger of the two

On July 1, 2011, Faber Enterprises acquired Ann’s Tool Company. Prior to the merger of the two companies, each company calculated its income for the entire year ended December 31, 2011. (It may be assumed that all Ann amounts occurred evenly over the year.) These estimates are as follows:

An analysis of the merger agreement revealed that the purchase price exceeded the fair value of all assets by $40,000. The book and fair values of Ann’s Tool Company on July 1, 2011, are given in the table below along with an estimate of the useful lives of each of these asset categories.

Management believes the company will be in a combined tax bracket of 30%. The company uses the straight-line method of computing depreciation and amortization and assigns a zero salvage value.
Required
1. Using the above information, prepare the Faber Enterprises income statement for the year ending December 31, 2011. Provide supporting calculations.
2. Prepare the required summarized disclosure of 2011 results if the acquisition occurs at the start of the year.

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Income Statement Accounts Faber Enterprises $550,000 200,000 $350,000 Ann's Tool Company- $140,000 50,000 90,000 Sales Revenue Cost of Goods Sold Gross Profit … Selling Expenses Administrative Expenses Depreciation Expense . . . . Amortization Expense $125,000 150,000 13,800 5,600 $30,000 45,000 7,500 2,000 84,500 $ 5,500 Total Operating Expenses. … … Nonoperating Revenues and Expenses: .* .. 294,400 55,600 Operating Income 4,000 Interest Income. Dividend Income 7,000 4,000 66,600 19,980 $ 46,620 Income Before Taxes Provision for Income Taxes (30% rate) 1,500 450 Net Income 1,050 Asset Account Book Value Fair Value Useful Life Inventory.. Land.... Buildings .. Equipment $30,000 50,000 75,000 32,000 1,000 12,000 $28,000 80,000 125,000 56,000 3,000 18,000 10,000 20,000 Sold August 2011 Unlimited 25 years 8 years 2 years 6 years 2 years 10 years Patent. Computer Software Copyright