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King's Road recently acquired all of Oxford Corporation's stock and

King's Road recently acquired all of Oxford Corporation's stock and is now consolidating the financial data of

Question:

King's Road recently acquired all of Oxford Corporation's stock and is now consolidating the financial data of this new subsidiary. King's Road paid a total of $850,000 for Oxford, which has the following accounts:

a. What amount of deferred tax liability arises in the acquisition?
b. What amounts will be used to consolidate Oxford with King's Road at the date of acquisition?
c. On a consolidated balance sheet prepared immediately after this takeover, how much goodwill should King's Road recognize? Assume a 40 percent effective tax rate.

Goodwill
Goodwill is an important concept and terminology in accounting which means good reputation. The word goodwill is used at various places in accounting but it is recognized only at the time of a business combination. There are generally two types of... Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...

Transcribed Image Text:

Fair Value Accounts receivable Inventory Land Buildings Equipment Liabilities $153,000 141,000 136,000 276,000 233,000 (281,000) Tax Basis $153,000 141,000 136,000 221,000 160,000 (281,000)

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a The assets and liabilities of Oxford the subsidiary will be consolidated at their individual net f...View the full answer

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Advanced Accounting

ISBN: 978-0077862220

12th edition

Authors: Joe Ben Hoyle, Thomas Schaefer, Timothy Doupnik

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Question Posted: Sep 26, 2016 09:59 AM

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