Stockholders of Concord Company, Bridgeport Company, and Bramble Company are considering alternative arrangements for a business...

Transcribed Image Text:

Stockholders of Concord Company, Bridgeport Company, and Bramble Company are considering alternative arrangements for a business combination. Balance sheets and the fair values of each company's assets on October 1, 2024, were as follows: Concord Bridgeport Bramble Assets $3,865,200 $7,560,100 $947,540 Liabilities $2,042,840 $2,186,840 $258,760 Common stock, $20 par value 2,020,000 1,805,180 535,240 Other contributed capital -0- 594,040 190,100 Retained earnings (deficit) (197,640) 2,974,040 (36,560) Total equities $3,865,200 $7,560,100 $947,540 Fair values of assets $4,158,050 $8,910,100 $1,305,390 Concord Company shares have a fair value of $52. A fair (market) price is not available for shares of the other companies because they are closely held. Fair values of liabilities equal book values. Prepare a balance sheet for the business combination. Assume the following: Concord Company acquires all the assets and assumes all the liabilities of Bridgeport and Bramble Companies by issuing in exchange 140,130 shares of its common stock to Bridgeport Company and 40,110 shares of its common stock to Bramble Company. (List assets in order of liquidity. Enter negative account balance with negative sign preceding the number e.g. -5,125 or parentheses e.g. (5,125).) Assets (except goodwill) Goodwill CONCORD COMPANY Balance Sheet October 1, 2024 Assets $ Total Assets $ Liabilities and Stockholders' Equity Liabilities Common Stock Other Contributed Capital Retained Earnings $ Total Liabilities and Stockholders' Equity $ Assume, further, that the acquisition was consummated on October 1, 2024, as described above. However, by the end of 2025, Concord was concerned that the fair values of one or both of the acquired units had deteriorated. To test for impairment, Concord decided to measure goodwill impairment using the present value of future cash flows to estimate the fair value of the reporting units (Bridgeport and Bramble). Concord accumulated the following data: Carrying Value of Year 2055 Present Value of Future Cash Flows Identifiable Net Assets* Fair Value Identifiable Net Assets Bridgeport $6,480,900 $6,288,170 $6,298,170 Bramble $1,917,200 $1,204,200 $1,004,200 * Identifiable Net Assets do not include goodwill. Prepare the journal entry, if needed, to record goodwill impairment at December 31, 2025. Use FASB's simplified approach to test for goodwill impairment (assume that the qualitative test is satisfied or bypassed). (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List debit entry before credit entry.) Account Titles and Explanation Impairment Loss Goodwill Debit Credit Stockholders of Concord Company, Bridgeport Company, and Bramble Company are considering alternative arrangements for a business combination. Balance sheets and the fair values of each company's assets on October 1, 2024, were as follows: Concord Bridgeport Bramble Assets $3,865,200 $7,560,100 $947,540 Liabilities $2,042,840 $2,186,840 $258,760 Common stock, $20 par value 2,020,000 1,805,180 535,240 Other contributed capital -0- 594,040 190,100 Retained earnings (deficit) (197,640) 2,974,040 (36,560) Total equities $3,865,200 $7,560,100 $947,540 Fair values of assets $4,158,050 $8,910,100 $1,305,390 Concord Company shares have a fair value of $52. A fair (market) price is not available for shares of the other companies because they are closely held. Fair values of liabilities equal book values. Prepare a balance sheet for the business combination. Assume the following: Concord Company acquires all the assets and assumes all the liabilities of Bridgeport and Bramble Companies by issuing in exchange 140,130 shares of its common stock to Bridgeport Company and 40,110 shares of its common stock to Bramble Company. (List assets in order of liquidity. Enter negative account balance with negative sign preceding the number e.g. -5,125 or parentheses e.g. (5,125).) Assets (except goodwill) Goodwill CONCORD COMPANY Balance Sheet October 1, 2024 Assets $ Total Assets $ Liabilities and Stockholders' Equity Liabilities Common Stock Other Contributed Capital Retained Earnings $ Total Liabilities and Stockholders' Equity $ Assume, further, that the acquisition was consummated on October 1, 2024, as described above. However, by the end of 2025, Concord was concerned that the fair values of one or both of the acquired units had deteriorated. To test for impairment, Concord decided to measure goodwill impairment using the present value of future cash flows to estimate the fair value of the reporting units (Bridgeport and Bramble). Concord accumulated the following data: Carrying Value of Year 2055 Present Value of Future Cash Flows Identifiable Net Assets* Fair Value Identifiable Net Assets Bridgeport $6,480,900 $6,288,170 $6,298,170 Bramble $1,917,200 $1,204,200 $1,004,200 * Identifiable Net Assets do not include goodwill. Prepare the journal entry, if needed, to record goodwill impairment at December 31, 2025. Use FASB's simplified approach to test for goodwill impairment (assume that the qualitative test is satisfied or bypassed). (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List debit entry before credit entry.) Account Titles and Explanation Impairment Loss Goodwill Debit Credit