Rock Solid Manufacturing, Inc., has acquired the net assets of Jelly Soft Manufacturing, Inc., for $10 million
Question:
Rock Solid Manufacturing, Inc., has acquired the net assets of Jelly Soft Manufacturing, Inc., for $10 million and now needs to address how the acquisition should be recorded on its books for financial reporting purposes and which intangible assets must be amortized and which must be tested for impairment in the future.
Case Study Requirements: Given the information provided below, solve for the goodwill amount then allocate the purchase price of $10 million to the appropriate assets acquired and liabilities assumed in accordance with ASC 805 – Business Combinations. Then identify which assets are tangible and which are intangible. Identify which intangible assets must be amortized and which must be tested for impairment in the future.
Fair Values:
Cash - $800
Accounts receivable - $1,500
Inventory - $850
Equipment - $500
Building - $1,200
Customer relationships (finite life) - $2,300
Patents (finite life) - $600
Trademarks (indefinite life) - $400
Goodwill – (solve for)
Accounts payable - $500
Accrued payroll - $50
Note payable – bank - $950
Expert Answer:
The tangible asset includes fixed and current assets an intangible asset is opposite to tangible ass... View the full answer
