Refer to the preceding information for Fast Cools acquisition of Fast Airs common stock. Assume Fast Cool

Question:

Refer to the preceding information for Fast Cool€™s acquisition of Fast Air€™s common stock. Assume Fast Cool issues 25,000 shares of its $20 fair value common stock for 100% of Fast Air€™s common stock. Fast Cool uses the simple equity method to account for its investment in Fast Air. Fast Cool and Fast Air have the following trial balances on December 31, 2012, shown on page 196.
Refer to the preceding information for Fast Cool€™s acquisition of

Required
1. Prepare a value analysis and a determination and distribution of excess schedule for the investment in Fast Air.
2. Complete a consolidated worksheet for Fast Cool Company and its subsidiary Fast Air Company as of December 31, 2012. Prepare supporting amortization and income distribution schedules.
Fast Cool Company and Fast Air Company are both manufacturers of air conditioning equipment. On January 1, 2011, Fast Cool acquires the common stock of Fast Air by exchanging its own $1 par, $20 fair value common stock. On the date of acquisition, Fast Air has the following balance sheet:

Refer to the preceding information for Fast Cool€™s acquisition of

Fast Cool requests that an appraisal be done to determine whether the book value of Fast Air€™s net assets reflect their fair values. The appraiser determines that several intangible assets exist, although they are unrecorded. If the intangible assets do not have an observable market, the appraiser estimates their value. The appraiser determines the following fair values and estimates:
Accounts receivable . .. . . . . .. .. .. . .. . . . . .. . . . $ 40,000
Inventory (soldduring2011). . . .. .. ... .. . . .. .. . 65,000
Land.. . .. . . . . .. . . . . . .. .. .. .. .. . . . .. . . .. .. . 100,000
Buildings (20-year life) . . . . . .. .... . .. . . . . .. . . . 500,000
Equipment(5-year life).. . . . . .. .... . .. . . . . .. . . . 100,000
Patent (5-year life) .. . .. . . . . .. .. .. . .. . . . . .. . . . 50,000
Current liabilities . .. . . . . . .. .. .. ... . . . . .. . . .. . 30,000
Mortgage payable (5-year life). .. ... .. .. . . . . .. . 205,000
Favorable purchase contract (2-year life) .. .. . . . . . 10,000
Any remaining excess is attributed to goodwill.

Intangible Assets
An intangible asset is a resource controlled by an entity without physical substance. Unlike other assets, an intangible asset has no physical existence and you cannot touch it.Types of Intangible Assets and ExamplesSome examples are patented...
Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on...
Distribution
The word "distribution" has several meanings in the financial world, most of them pertaining to the payment of assets from a fund, account, or individual security to an investor or beneficiary. Retirement account distributions are among the most...
Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

Advanced Accounting

ISBN: 978-0538480284

11th edition

Authors: Paul M. Fischer, William J. Tayler, Rita H. Cheng

Question Posted: