Metal Fuzz Limited acquired the business of Heatseeker Limited for $115 000. Heatseekers balance sheet consist of
Question:
Metal Fuzz Limited acquired the business of Heatseeker Limited for $115 000. Heatseeker’s balance sheet consist of the following accounts along with their carrying amounts and the estimated fair values of the assets and liabilities immediately before acquisition date:
Carrying amount ($) | Fair value ($) | |
Accounts receivable | 17,000 | 17,000 |
Inventory | 25,000 | 30,000 |
Building (net) | 65,000 | 75,000 |
Accounts Payable | 15,000 | 15,000 |
Retained Earnings | 10,000 | |
Share Capital | 82,000 |
Heatseeker Limited’s also disclosed a contingent liability in its notes relating to a guarantee for a loan of $3,000. At the date of acquisition it was only a 40% chance that the guarantee would be invoked.
The net value of identifiable assets and liabilities acquired by Metal Fuzz Limited would be:
Financial Accounting A User Perspective
ISBN: 978-0470676608
6th Canadian Edition
Authors: Robert E Hoskin, Maureen R Fizzell, Donald C Cherry