Pilot Supplies acquires all the voting stock of Stive Automotive for $65,000 in cash. Stives trial balance
Question:
Pilot Supplies acquires all the voting stock of Stive Automotive for $65,000 in cash. Stive’s trial balance at the date of acquisition is:
Dr(Cr) Dr(Cr)
A. Current assets............................$ 2,000 E. Capital stock................. (2,000)
B. Prop., plant and equip...............14,000 F. Retained deficit............ 3,500
C. Current liabilities......................... (3,000) G. Accum other comp loss 500
D. Long-term liabilities................. (15,000)
Date-of-acquisition book values approximate fair value for all reported assets and liabilities except for property and equipment that had a fair value of $25,000. The following previously unreported intangibles (Not all may qualify as separately reported assets) are identified as belonging to Stive, along with their estimated fair values at the date of acquisition:
H. Favorable lease agreement ..............................................$ 2,000
I. Technical expertise of workforce...................................... 10,000
J. Potential contracts................................................................. 4,000
K. Developed technology………………………………………………15,000
L. Invest in Stive…......................................................................65,000
Required:
a. Calculate the goodwill to be recognized for this acquisition.
b. Prepare the eliminating entries necessary to consolidate the balance sheet accounts of Pilot and Stive at the date of acquisition, using the capital letters above. List the debit accounts and amounts first.
