Help Save & Exit Sub Check my work On January 1, Prine, Inc., acquired 100 percent of Lydia Company's common stock for a fair value of $131,683,750 in cash and stock. Lydia's assets and liabilities equaled their fair values except for its equipment, which was undervalued by $582,500 and had a 10-year remaining life Prine specializes in media distribution and viewed its acquisition of Lydia as a strategic move into content ownership and creation. Prine expected both cost and revenue synergies from controlling Lydia's artistic content (a large library of classic movies) and its sports programming specialty video operation. Accordingly, Prine allocated Lydia's assets and liabilities (including $58,741.750 of goodwll) to a newly formed operating segment appropriately designated as a reporting unit. The fair values of the reporting unit's identifiable assets and liabilities through the first year of operations were as follows. Fair Values 12/31 Cash Receivables (net) Movie library (25-year remaining life) Broadcast licenses (indefinite r Equipment (10-year remaining life) Current liabilities Long-term debt $ 242,000 845,500 584,0001,015, 000 41,750,000 69,510,000 emaining 1ife) 15,590,000 20,700,000 21,560,000 19,870,000 (544,000)(670,000) (6,240,000) (6,305,000) However, Lydia's assets have taken longer than anticipated to produce the expected synergies with Prine's operations. Accordingly. Prine reviewed events and circumstances and concluded that Lydia's fair value was likely less than its carry Prine reduced its assessment of the Lydia reporting unit's fair value to $122,465,500. ing amount. At year-end, At December 31, Prine and Lydia submitted the following balances for consolidation. There were no intra-entity payables on that date $ (22,300,000) $(14,000,000) Revenues Operating expenses Equity in Lydia earnings 12,900,000 12,100,000 (1,041,750) Pre13 of 13Next