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Here is Nine Questions for my Advanced Accounting Class:

First Question: PR Company pays $25,000 in cash and issues no-par stock with a fair value of $40,000 to acquire all of SX Corporation's net assets. SX's balance sheet at the date of acquisition is as follows:

	SX Corporation
	Book value	Fair value
Current assets	$ 5,000	$ 8,000
Property, plant & equipment, net	13,000	9,000
Identifiable intangible assets	4,000	13,000
Total assets	$22,000
Current liabilities	$ 4,600	$ 5,600
Long-term debt	14,500	13,800
Capital stock	4,000
Retained earnings	9,500
Accumulated other comprehensive income	(1,000)
Treasury stock	(9,600)
Total liabilities & equity	$22,000

PR's consultants find these items that are not reported on SX's balance sheet:

	Fair value
Potential contracts with new customers	$7,500
Advanced production technology	2,500
Future cost savings	1,000
Customer lists	2,500

Outside consultants are paid $300 in cash, and registration fees to issue PR's new stock are $500.The question below relates to the entry or entries made to record the business combination.

Previously unrecorded intangibles are

$ 2,500

$ 5,000

$12,500

Second Question: PR Company pays $20,000 in cash and issues no-par stock with a fair value of $40,000 to acquire all of SX Corporation's net assets. SX's balance sheet at the date of acquisition is as follows:

	SX Corporation
	Book value	Fair value
Current assets	$ 4,000	$ 7,500
Property, plant & equipment, net	12,000	8,000
Identifiable intangible assets	4,000	15,000
Total assets	$20,000
Current liabilities	$ 3,600	$ 4,500
Long-term debt	14,000	13,800
Capital stock	4,000
Retained earnings	9,000
Accumulated other comprehensive income	(1,000)
Treasury stock	(9,600)
Total liabilities & equity	$20,000

PR's consultants find these items that are not reported on SX's balance sheet:

	Fair value
Potential contracts with new customers	$ 9,000
Advanced production technology	3,500
Future cost savings	3,000
Customer lists	1,000

Outside consultants are paid $500 in cash, and registration fees to issue PR's new stock are $800.The question below relates to the entry or entries made to record the business combination.

Capital stock is credited in the amount of

$40,000

$60,000

$39,200

$38,400

Third Question: PR Company pays $15,000 in cash and issues no-par stock with a fair value of $45,000 to acquire all of SX

Corporation's net assets. SX's balance sheet at the date of acquisition is as follows:

	SX Corporation
	Book value	Fair value
Current assets	$ 3,000	$ 6,200
Property, plant & equipment, net	11,000	8,000
Identifiable intangible assets	3,000	16,000
Total assets	$17,000
Current liabilities	$ 2,600	$ 3,000
Long-term debt	13,000	12,600
Capital stock	4,000
Retained earnings	8,000
Accumulated other comprehensive income	(1,000)
Treasury stock	(9,600)
Total liabilities & equity	$17,000

PR's consultants find these items that are not reported on SX's balance sheet:

	Fair value
Potential contracts with new customers	$ 8,500
Advanced production technology	4,500
Future cost savings	2,500
Customer lists	1,500

Outside consultants are paid $300 in cash, and registration fees to issue PR's new stock are $500. The question below relates to the entry or entries made to record the business combination.

Three months after the acquisition, a fire damages SX's equipment, reducing its fair value from $8,000 to $4,500. How is this event reported? Ignore depreciation.

Loss of $3,500, reported on the income statement

$3,500 increase in goodwill

$3,500 decrease in goodwill

Not reported

Fourth Question: PR Company pays $15,000 in cash and issues no-par stock with a fair value of $45,000 to acquire all of SX Corporation's net assets. SX's balance sheet at the date of acquisition is as follows:

	SX Corporation
	Book value	Fair value
Current assets	$ 3,000	$ 6,200
Property, plant & equipment, net	11,000	8,000
Identifiable intangible assets	3,000	16,000
Total assets	$17,000
Current liabilities	$ 2,600	$ 3,000
Long-term debt	13,000	12,600
Capital stock	4,000
Retained earnings	8,000
Accumulated other comprehensive income	(1,000)
Treasury stock	(9,600)
Total liabilities & equity	$17,000

PR's consultants find these items that are not reported on SX's balance sheet:

	Fair value
Potential contracts with new customers	$ 8,500
Advanced production technology	4,500
Future cost savings	2,500
Customer lists	1,500

Outside consultants are paid $300 in cash, and registration fees to issue PR's new stock are $500. The question below relates to the entry or entries made to record the business combination.

Three months after the acquisition, PR receives information revealing that the identifible intangible assets reported on SX's books at the date of acquisition were really worth $13,500 instead of $16,000. How is this information reported? Ignore amortization.

Loss of $2,500, reported on the income statement

$2,500 decrease in goodwill

$2,500 increase in goodwill

Not reported

Fifth Question: PR Company pays $20,000 in cash and issues no-par stock with a fair value of $40,000 to acquire all of SX Corporation's net assets. SX's balance sheet at the date of acquisition is as follows:

	SX Corporation
	Book value	Fair value
Current assets	$ 4,000	$ 7,500
Property, plant & equipment, net	12,000	8,000
Identifiable intangible assets	4,000	15,000
Total assets	$20,000
Current liabilities	$ 3,600	$ 4,500
Long-term debt	14,000	13,800
Capital stock	4,000
Retained earnings	9,000
Accumulated other comprehensive income	(1,000)
Treasury stock	(9,600)
Total liabilities & equity	$20,000

PR's consultants find these items that are not reported on SX's balance sheet:

	Fair value
Potential contracts with new customers	$ 9,000
Advanced production technology	3,500
Future cost savings	3,000
Customer lists	1,000

Outside consultants are paid $500 in cash, and registration fees to issue PR's new stock are $800.The question below relates to the entry or entries made to record the business combination.

Now assume PR paid $8,000 in cash for SX's net assets. There are no consultant fees, and no shares are issued. Assume that SX's previously unrecorded intangible assets, capitalizable per GAAP, have a fair value'of $1,000. What is the bargain gain?

$ 0

$5,200

$3,600

$4,100

Sixth Question: PR Company pays $10,000 in cash and issues stock with a fair value of $40,000 to acquire all of SX Corporation's stock. SX will be a subsidiary of PR. Balance sheet accounts just prior to the acquisition are as follows, in trial balance format:

	PR Company	SX Corporation
	Book value	Book value	Fair value
	Dr (Cr)	Dr (Cr)	Dr (Cr)
Current assets	$9,000	$ 4,500	$ 6,900
Property, plant & equipment, net	96,000	11,000	4,500
Identifiable intangible assets	3,000	3,000	5,000
Current liabilities	(9,000)	(1,000)	(1,300)
Long-term debt	(51,000)	(6,000)	(4,000)
Capital stock	(39,200)	(7,000)
Retained earnings	(9,000)	(9,500)
Accumulated other comprehensive income	(800)	500
Treasury stock	1,000	4,500
Total	$ 0	$ 0

PR's consultants find these items that are not reported on SX's balance sheet:

	Fair value
Potential contracts with new customers	$ 5,000
Advanced production technology	3,000
Future cost savings	1,500
Customer lists	2,000

Outside consultants are paid $200 in cash, and registration fees to issue PR's new stock are $400, paid in cash.

Total acquisition cost reported by PR (the debit to Investment on PR's books) is

$50,000

$50,200

$50,400

$50,600

Seventh Question: PR Company pays $10,000 in cash and issues stock with a fair value of $40,000 to acquire all of SX Corporation's stock. SX will be a subsidiary of PR. Balance sheet accounts just prior to the acquisition are as follows, in trial balance format:

	PR Company	SX Corporation
	Book value	Book value	Fair value
	Dr (Cr)	Dr (Cr)	Dr (Cr)
Current assets	$9,000	$ 4,500	$ 6,900
Property, plant & equipment, net	96,000	11,000	4,500
Identifiable intangible assets	3,000	3,000	5,000
Current liabilities	(9,000)	(1,000)	(1,300)
Long-term debt	(51,000)	(6,000)	(4,000)
Capital stock	(39,200)	(7,000)
Retained earnings	(9,000)	(9,500)
Accumulated other comprehensive income	(800)	500
Treasury stock	1,000	4,500
Total	$ 0	$ 0

PR's consultants find these items that are not reported on SX's balance sheet:

	Fair value
Potential contracts with new customers	$ 5,000
Advanced production technology	$3,000
Future cost savings	$1,500
Customer lists	$2,000

Outside consultants are paid $200 in cash, and registration fees to issue PR's new stock are $400, paid in cash.

On the consolidation working paper at the date of acquisition, elimination (E) credits the investment account by

$ 11,500

$ 12,000

$ 7,000

$16,500

Eigthen Question:

PR Company pays $20,000 in cash and issues stock with a fair value of $50,000 to acquire all of SX Corporation's stock. SX will be a subsidiary of PR. Balance sheet accounts just prior to the acquisition are as follows, in trial balance format:

	PR Company	SX Corporation
	Book value	Book value	Fair value
	Dr (Cr)	Dr (Cr)	Dr (Cr)
Current assets	$20,000	$ 9,000	$ 13,500
Property, plant & equipment, net	198,000	22,000	15,000
Identifiable intangible assets	8,000	5,500	17,000
Current liabilities	(20,000)	(3,200)	(4,100)
Long-term debt	(104,000)	(10,000)	(8,000)
Capital stock	(83,400)	(11,000)
Retained earnings	(18,000)	(18,000)
Accumulated other comprehensive income	(2,600)	1,800
Treasury stock	2,000	3,900
Total	$ 0	$ 0

PR's consultants find these items that are not reported on SX's balance sheet:

	Fair value
Potential contracts with new customers	$ 4,000
Advanced production technology	$3,000
Future cost savings	$2,500
Customer lists	$2,000

Outside consultants are paid $400 in cash, and registration fees to issue PR's new stock are $600, paid in cash.

On the consolidation working paper at the date of acquisition, elimination (R) debits identifible intangible assets by

$1,000

$13,000

$16,500

$23,000

Ninth Question: PR Company pays $20,000 in cash and issues stock with a fair value of $50,000 to acquire all of SX Corporation's stock. SX will be a subsidiary of PR. Balance sheet accounts just prior to the acquisition are as follows, in trial balance format:

	PR Company	SX Corporation
	Book value	Book value	Fair value
	Dr (Cr)	Dr (Cr)	Dr (Cr)
Current assets	$12,000	$ 5,500	$ 7,300
Property, plant & equipment, net	108,000	12,000	9,500
Identifiable intangible assets	2,000	8,000	15,000
Current liabilities	(10,000)	(4,300)	(4,900)
Long-term debt	(60,000)	(16,000)	(13,500)
Capital stock	(44,600)	(5,000)
Retained earnings	(8,000)	(10,500)
Accumulated other comprehensive income	(200)	1,000
Treasury stock	800	9,300
Total	$ 0	$ 0

PR's consultants find these items that are not reported on SX's balance sheet:

	Fair value
Potential contracts with new customers	$ 5,000
Advanced production technology	$4,500
Future cost savings	$2,000
Customer lists	$2,500

Outside consultants are paid $200 in cash, and registration fees to issue PR's new stock are $500.

On the consolidated balance sheet at the date of acquisition, elimination (R)

credits long-term debt by $2,500.

debits long-term debt by $13,500.

credits long-term debt by $13,500.

debits long-term debt by $2,500.

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