ols Window Help 58 s adv accounting 401pdf page 67 of 1182 P

ols Window Help 58% s adv accounting 401.pdf (page 67 of 1,182) Problem 1-3 (LO 3, 4, 6) Pro forma income after an acquisition. Moon Company is contemplating the acquisition of Yount, Inc., on January 1, 20X1. If Moon acquires Yount, it will pay $730,000 in cash to Yount and acquisition costs of $20,000. The January 1, 20X1, balance sheet of Yount, Inc., is anticipated to be as follows: Yount, Inc. Pro Forma Balance Sheet January 1,20x1 Assets Liabilities and Equity $100,000 Current liabilities Accounts receivable Inventory . Depreciable fixed assets Accumulated depreciation .(80,000 $ 30,000 165,000 80,000 115,000 120,000 Long-term liabilities 200,000 Retained earnings 390000 Total liablities and equity... $390,000 Total assets.. Fair values agree with book values except for the inventory and the depreciable fixed assets, which have fair values of $70,000 and $400,000, respectively Your projections of the combined operations for 20XI are as follows: Combined sales $200,000

Solution

(1) Total consideration for Yount: Cash $              730,000 Less fair value of net assets acquired: Cash equivalents $   100,000 Accounts receivable       120,000 Inventory         70,000 Depreciable fixed assets       400,000 Current liabilities       (30,000) Long-term liabilities        (165,000) Value of net identifiable assets acquired                  495,000 Excess of total cost over fair value of net assets (goodwill) $              235,000 Acquisition entry: Cash Equivalents       100,000 Accounts Receivable       120,000 Inventory         70,000 Depreciable Fixed Assets       400,000 Goodwill       235,000 Current Liabilities                   30,000 Long-Term Liabilities                  165,000 Cash                  730,000 Acquisition Expense            20,000 Cash                          20,000 (2) Pro Forma Income: Combined Income Sales $                   200,000 Less: Cost of goods sold ($120,000 + $20,000 additional for inventory valuation)                     (140,000) Other expenses                       (25,000) Depreciation (1/20 of $400,000 market value)                       (20,000) Net income $                     15,000