On June 30, 2017, Wisconsin, Inc., issued $300,000 in debt and 15,000 new shares of its...
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- On June 30, 2017, Wisconsin, Inc., issued$300,000 in debt and 15,000 new shares of its $10 par value stockto Badger Company owners in exchange for all of the outstandingshares of that company. Wisconsin shares had a fair value of $40per share. Prior to the combination, the financial statements forWisconsin and Badger for the six-month period ending June 30, 2017,were as follows:
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Wisconsin
Badger
Revenues
$?(900,000)
$?(300,000)
Expenses
??660,000
??200,000
?Net income
$?(240,000)
$?(100,000)
Retained earnings, 1/1
$?(800,000)
$?(200,000)
Net income
? (240,000)
?(100,000)
Dividends declared
??90,000
???–0–
?Retained earnings, 6/30
$?(950,000)
$?(300,000)
Cash
$ 80,000
$ 110,000
Receivables and inventory
??400,000
??170,000
Patented technology (net)
??900,000
??300,000
Equipment (net)
??700,000
??600,000
?Total assets
$ 2,080,000
$ 1,180,000
Liabilities
$ ?(500,000)
$ (410,000)
Common stock
? (360,000)
(200,000)
Additional paid-in capital
? (270,000)
(270,000)
Retained earnings
(950,000)
(300,000)
?Total liabilities and equities
$ (2,080,000)
$ (1,180,000)
- Wisconsin also paid $30,000 to a broker for arranging thetransaction. In addition, Wisconsin paid $40,000 in stock issuancecosts. Badger’s equipment was actually worth $700,000, but itspatented technology was valued at only $280,000.
What are the consolidated balances forthe following accounts?
- Net income.
- Retained earnings, 1/1/17.
- Patented technology.
- Goodwill. please explain this one better thankyou
- Liabilities.
- Common stock.
- Additional paid-in capital.
- On June 30, 2017, Wisconsin, Inc., issued$300,000 in debt and 15,000 new shares of its $10 par value stockto Badger Company owners in exchange for all of the outstandingshares of that company. Wisconsin shares had a fair value of $40per share. Prior to the combination, the financial statements forWisconsin and Badger for the six-month period ending June 30, 2017,were as follows:
Page 81
Wisconsin | Badger | |
Revenues | $?(900,000) | $?(300,000) |
Expenses | ??660,000 | ??200,000 |
?Net income | $?(240,000) | $?(100,000) |
Retained earnings, 1/1 | $?(800,000) | $?(200,000) |
Net income | ? (240,000) | ?(100,000) |
Dividends declared | ??90,000 | ???–0– |
?Retained earnings, 6/30 | $?(950,000) | $?(300,000) |
Cash | $ 80,000 | $ 110,000 |
Receivables and inventory | ??400,000 | ??170,000 |
Patented technology (net) | ??900,000 | ??300,000 |
Equipment (net) | ??700,000 | ??600,000 |
?Total assets | $ 2,080,000 | $ 1,180,000 |
Liabilities | $ ?(500,000) | $ (410,000) |
Common stock | ? (360,000) | (200,000) |
Additional paid-in capital | ? (270,000) | (270,000) |
Retained earnings | (950,000) | (300,000) |
?Total liabilities and equities | $ (2,080,000) | $ (1,180,000) |
- Wisconsin also paid $30,000 to a broker for arranging thetransaction. In addition, Wisconsin paid $40,000 in stock issuancecosts. Badger’s equipment was actually worth $700,000, but itspatented technology was valued at only $280,000.
What are the consolidated balances forthe following accounts?
- Net income.
- Retained earnings, 1/1/17.
- Patented technology.
- Goodwill. please explain this one better thankyou
- Liabilities.
- Common stock.
- Additional paid-in capital.
Answer & Explanation Solved by verified expert
Solution:
| a | Net income (240,000-30,000)(broker fees) | 210,000 |
| b | Retained earnings as on 1/1(the balance on 1/1) | 800,000 |
| c | Patented Technology(900,000+280,000(subsidiary fair value)) | 1,180,000 |
| d | Good will | 50,000 |
| e | Liabilities(500,000+410,000+300,000(new debit)) | 1,210,000 |
| f | Common stock(360,000+(15000*10)) | 510,000 |
| g | additional paid in capital(270,000+(15000*30))-40,000 | 680,000 |
Calculation of Goodwill
Consideration transferred 300,000+(15000*40) =900,000
Less:Book value
(200,000+270,000+300,000) =770,000
Fair value in excess of book value a =130,000
Excess fair value(undervalued equipment)(700,000-600,000)b =100,000
Excess fair value(overvalued patented technology)(300,000-280,000)c =-20,000
Goodwill a-b-c =50,000
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