a. UmbrellaAcademy3, Inc. purchased another company StrangerThings4, Corp. in its entirety for $165 million in cash (i.e., this is an M&A). Below is a list of the assets and liabilities that StrangerThings4 has (book values refer to how they appeared on StrangerThings4’ Balance Sheet before the acquisition, while fair values are determined as a result of independent evaluation).

StrangerThings4 Assets and Liabilities: Book Value Fair Value •

Accounts Receivable: 35 30 •

PP&E 30* 35 •

Goodwill from prior acquisitions 45 •

Copyrights (internally developed) 70 •

Accounts Payable 18 18 •

Deferred Tax Liability 16 12

* BV of PP&E is comprised of Gross PP&E of 50 minus Accumulated Depreciation of 20

What assets does UmbrellaAcademy3 add to its Balance Sheet as a result of this M&A

Asset Name Amount What liabilities does UmbrellaAcademy3 add to its Balance Sheet as a result of this M&A

Liability Name Amount

b. A year later UmbrellaAcademy3 values its StrangerThings4 related goodwill asset to be $20.

What, if any, are the financial statement effects of this valuation?

Assets = Liabilities + Equity Sales - Expenses = Profit

Answer rating: 100% (QA)

step ... View the full answer