On December 31, 20X6, the statements of financial position of Prosper Ltd. and Succeed Corp. are...

  

Transcribed Image Text:

On December 31, 20X6, the statements of financial position of Prosper Ltd. and Succeed Corp. are as follows: Cash Accounts receivable Inventories Plant and equipment (net) TOTAL ASSETS Current liabilities Long-term liabilities Common shares Retained earnings TOTAL LIABILITIES AND EQUITIES Prosper Ltd. $ 400,000 1,600,000 1,000,000 3,500,000 $6,500,000 $ 600,000 900,000 2,500,000 2,500,000 $6,500,000 Succeed Corp. $ 780,000 2,000,000 520,000 5,100,000 $8,400,000 $ 310,000 610,000 1,000,000 6,480,000 $8,400,000 Prosper Ltd. has 100,000 common shares outstanding, and Succeed Corp. has 45,000 shares outstanding. On January 1, 20X7, Prosper Ltd. issues an additional 90,000 common shares to Succeed Corp., at $100 per share, in return for all of the assets and liabilities of that company. Succeed Corp. distributes Prosper Ltd.'s common shares to its shareholders in return for their outstanding common shares, and ceases to exist as a separate legal entity. At the time of this transaction, the cash, accounts receivable, inventories, and current liabilities of both compa- nies have fair values equal to their carrying values. The plant and equipment and long-term liabilities have fair values as follows: Prosper Ltd. $3,900,000 600,000 Plant and equipment (net) Long-term liabilities In addition, Succeed Corp. has a patent worth $110,000. C. Succeed Corp. $5,450,000 510,000 Required a. What is the amount of goodwill that would be recorded for this business combination? b. In completing the fair value adjustment allocation, what other intangible assets could potentially exist that a value could be allocated to instead of (or in addition to) goodwill? Prepare an SFP at January 1, 20X7, for Prosper Ltd., that is, after the purchase. On December 31, 20X6, the statements of financial position of Prosper Ltd. and Succeed Corp. are as follows: Cash Accounts receivable Inventories Plant and equipment (net) TOTAL ASSETS Current liabilities Long-term liabilities Common shares Retained earnings TOTAL LIABILITIES AND EQUITIES Prosper Ltd. $ 400,000 1,600,000 1,000,000 3,500,000 $6,500,000 $ 600,000 900,000 2,500,000 2,500,000 $6,500,000 Succeed Corp. $ 780,000 2,000,000 520,000 5,100,000 $8,400,000 $ 310,000 610,000 1,000,000 6,480,000 $8,400,000 Prosper Ltd. has 100,000 common shares outstanding, and Succeed Corp. has 45,000 shares outstanding. On January 1, 20X7, Prosper Ltd. issues an additional 90,000 common shares to Succeed Corp., at $100 per share, in return for all of the assets and liabilities of that company. Succeed Corp. distributes Prosper Ltd.'s common shares to its shareholders in return for their outstanding common shares, and ceases to exist as a separate legal entity. At the time of this transaction, the cash, accounts receivable, inventories, and current liabilities of both compa- nies have fair values equal to their carrying values. The plant and equipment and long-term liabilities have fair values as follows: Prosper Ltd. $3,900,000 600,000 Plant and equipment (net) Long-term liabilities In addition, Succeed Corp. has a patent worth $110,000. C. Succeed Corp. $5,450,000 510,000 Required a. What is the amount of goodwill that would be recorded for this business combination? b. In completing the fair value adjustment allocation, what other intangible assets could potentially exist that a value could be allocated to instead of (or in addition to) goodwill? Prepare an SFP at January 1, 20X7, for Prosper Ltd., that is, after the purchase.

Answer rating: 100% (QA)

a The amount of goodwill that would be recorded for this business combination is Purchase considerat... View the full answer