QQuirk Enterprises acquires Realcloud Inc. and records it as a business combination. Realcloud's identifiable net assets...
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QQuirk Enterprises acquires Realcloud Inc. and records it as a business combination. Realcloud's identifiable net assets have a fair value of $30 million, and previously unrecorded intangible assets, in the form of developed technology and customer relationships, are valued at $35 million. Both intangibles meet the requirements for recognition as identifiable intangible assets. Quirk pays $100 million in cash to the former shareholders of Realcloud. Six months after the acquisition, it is determined that the value of Realcloud's developed technology is $2,000,000 higher, but the value of its customer relationships is $500,000 lower. How are these value changes reported, if both are the result of changes in conditions occurring subsequent to the acquisition? Select one: a. Identifiable intangibles increase $1,500,000 and a gain of $1,500,000 is reported in income. b. Goodwill increases $500,000, identifiable intangibles decrease $500,000. The increase in the value of developed technology is not reported. X c. A loss of $500,000 is reported in income; the increase in the value of developed technology is not reported. d. Identifiable intangibles increase, and goodwill decreases by $1,500,000. QQuirk Enterprises acquires Realcloud Inc. and records it as a business combination. Realcloud's identifiable net assets have a fair value of $30 million, and previously unrecorded intangible assets, in the form of developed technology and customer relationships, are valued at $35 million. Both intangibles meet the requirements for recognition as identifiable intangible assets. Quirk pays $100 million in cash to the former shareholders of Realcloud. Six months after the acquisition, it is determined that the value of Realcloud's developed technology is $2,000,000 higher, but the value of its customer relationships is $500,000 lower. How are these value changes reported, if both are the result of changes in conditions occurring subsequent to the acquisition? Select one: a. Identifiable intangibles increase $1,500,000 and a gain of $1,500,000 is reported in income. b. Goodwill increases $500,000, identifiable intangibles decrease $500,000. The increase in the value of developed technology is not reported. X c. A loss of $500,000 is reported in income; the increase in the value of developed technology is not reported. d. Identifiable intangibles increase, and goodwill decreases by $1,500,000.
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Related Book For
Advanced Financial Accounting
ISBN: 978-0078025624
10th edition
Authors: Theodore E. Christensen, David M. Cottrell, Richard E. Baker
Posted Date:
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