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Francisco Inc acquired 100 percent of the voting shares of Beltran Company on January 1, 2012. In exchange, Francisco paid $450000 in cash and issued 104000 shares of its own $1 par value common

Francisco Inc acquired 100 percent of the voting shares of Beltran Company on January 1, 2012. In exchange, Francisco paid $450000 in cash and issued 104000 shares of its own $1 par value common

Francisco Inc. acquired 100 percent of the voting shares of Beltran Company on January 1,

2012. In exchange, Francisco paid $450,000 in cash and issued 104,000 shares of its own $1 par value common stock. On this date, Francisco’s stock had a fair value of $12 per share. The combination is a statutory merger with Beltran subsequently dissolved as a legal corpora- tion. Beltran’s assets and liabilities are assigned to a new reporting unit.

The following reports the fair values for the Beltran reporting unit for January 1, 2012, and

December 31, 2013, along with their respective book values on December 31, 2013.

 

 

Fair alues Fair alues Book alues

Beltran Reporting Unit 1/1/12 12/31/13 12/31/13

 

 

Cash

 

$ 75,000

 

$ 50,000

 

$ 50,000

Receivables

193,000

225,000

225,000

Inventory

281,000

305,000

300,000

Patents

525,000

600,000

500,000

Customer relationships

500,000

480,000

450,000

Equipment (net)

295,000

240,000

235,000

Goodwill

?

?

400,000

Accounts payable

(121,000)

(175,000)

(175,000)

Long-term liabilities

(450,000)

(400,000)

(400,000)

 

a. Prepare Francisco’s journal entry to record the assets acquired and the liabilities assumed in the Beltran merger on January 1, 2012.

On December 31, 2013, Francisco opts to forego any goodwill impairment qualitative assessment and estimates that the total fair value of the entire Beltran reporting unit is

$1,425,000. What amount of goodwill impairment, if any, should Francisco recognize on its 2013 income statement?

 

 

LO6

Tripti 09-Jul-2020

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