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Prince Corporation acquires Squire Service Corporation for 1 million shares of Prince stock, valued at $30 per share. Squire is merged into Prince, although it continues to do business under the Squire Service name. Professional fees connected with the acquisition are $900,000 and costs of registering and issuing the new shares are $400,000, both paid in cash. Squire performs vehicle maintenance services for owners of auto, truck and bus fleets. Squire's balance sheet at acquisition is as follows: Cash $200,000 Current liabilities $2,900,000 Accounts receivable 2,500,000 Long-term liabilities 8,600,000 Parts inventory 5,200,000 Stockholders' equity 13,200,000 Equipment 16,800,000 Total assets $24,700,000 Total liabilities and equity $24,700,000 In reviewing Squire's assets and liabilities, you determine the following: On a discounted present value basis, the accounts receivable have a fair value of $2,300,000, and the long-term liabilities have a fair value of $8,000,000. The current replacement cost of the parts inventory is $6,000,000. The current replacement cost of the equipment is $18,500,000. Squire occupies its service facilities under an operating lease with ten years remaining. The rent is below current market levels, giving the lease an estimated fair value of $1,250,000. Squire has long-term service contracts with several large fleet owners. These contracts have been profitable; the present value of expected profits over the remaining term of the contracts is estimated at $1,000,000. Squire has a skilled and experienced work force. You estimate that the cost to hire and train replacements would be $750,000. Squire's trade name is well-known among fleet owners and is estimated to have a fair value of $200,000. (a) Calculate the amount of goodwill that Prince records for the acquisition. $Answer (b) Prepare Prince's journal entry or entries to record the merger with Squire.

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