Bennybo Corp purchased 75% of Marv Inc on January 1, 2019, for a cash payment of $90,000. At the time of the business combination, Marv Inc had common shares and retained earnings of $20,000 and $65,000 respectively.

At the date of acquisition, Marv had net assets with fair values that were equal to their carrying values and tax base except for a specialized piece of equipment which had a fair value of $50,000 and a carrying value of $24,000. The tax base on the specialized piece of equipment was $18,000 at the date of acquisition.

It was determined that the specialized piece of equipment had a remaining useful life of 10 years. Both companies use the straight-line method for amortizing equipment and pay tax at a rate of 30%. Assume that Marv has appropriately recorded deferred tax on its separate entity statements for any temporary tax difference related to the specialized piece of equipment.

1. What is the amount of the deferred tax asset or liability that will appear on the consolidated balance sheet on January 1, 2019?
2. What would be the amount of the acquisition differential would be allocated to a deferred tax asset or liability related to the specialized piece of equipment at the date of acquisition?
3. What is the amount of goodwill on the consolidated balance sheet at January 1, 2019?
4. What is the amount of goodwill on the consolidated balance sheet at December 31, 2019?
5. What is the balance of the specialized equipment on the consolidated balance sheet at January 1, 2019?

Answer rating: 100% (QA)

There is a deferred tax asset of 6000 The acquisition differential would be 26000 The amount of good... View the full answer