Pinnacle Corporation acquired all of Stengl Corporation's common stock by issuing 250,000 shares of $1 par common
Question:
Pinnacle Corporation acquired all of Stengl Corporation's common stock by issuing 250,000 shares of $1 par common stock with a current market value of $7,000,000. Related accountants' and attorneys' fees were $300,000, paid in cash. The total book value of Stengl's stockholders' equity consists of capital stock of $200,000 and retained earnings of $1,700,000. Book values and fair values of Stengl's assets and liabilities are given below:
Book Value | Fair Value | |
---|---|---|
Cash and receivables | $700,000 | $700,000 |
Inventories | 1,000,000 | 800,000 |
Plant assets, net | 1,500,000 | 900,000 |
Current liabilities | (900,000) | (900,000) |
Long-term debt | (400,000) | (370,000) |
Totals | $1,900,000 | $1,130,000 |
In addition, Stengl has previously unrecorded identifiable intangible assets with a fair value of $720,000 that meet FASB ASC 805 criteria for recognition.
(a) Prepare the entry Pinnacle makes to record the acquisition on its own books.
(b) Prepare the working paper eliminating entries to consolidate the balance sheets of Pinnacle Corporation and Stengl Corporation at the date of acquisition.
Advanced Financial Accounting
ISBN: 978-0078025624
10th edition
Authors: Theodore E. Christensen, David M. Cottrell, Richard E. Baker