Petrel Corporation acquires all of the stock of Samson Company for $30 million i

Question

Petrel Corporation acquires all of the stock of Samson Company for $30 million in cash. Samson’s balance sheet accounts at the date of acquisition are listed below. Date-of-acquisition fair values for Samson’s assets and liabilities are also displayed. Samson has previously unreported developed technology valued at $6 million, meeting the criteria for capitalization per ASC Topic 805.

Required

a. Prepare a schedule calculating the goodwill to be recognized for this acquisition.

Instructions:

When appropriate, use negative signs with your excess of fair value over book value answers (left column only).

Do not use negative signs with your answers in the right column.

Enter answers in thousands.

b. Prepare the eliminating entries to consolidate the balance sheets of Petrel and Samson at the date of acquisition.

Enter answers in thousands.

(in thousands) Book Value
Dr (Cr) Fair Value
Dr (Cr) Cash $2,000 $2,000 Accounts receivable 5,000 4,500 Inventories 30,000 15,000 Land, buildings and equipment, net 320,000 100,000 Trademarks 10,000 150,000 Current liabilities (45,000) (45,000) Noncurrent liabilities (250,000) (245,000) Common stock, $2 par (1,000) Additional paid-in capital (80,000) Retained earnings 5,500 Accumulated other comprehensive income (500) Treasury stock 4,000 Total $0

Explanation / Answer

Ref.

Acquisition cost             30,000 Samson’s book value            (72,000) =-1000-80000+5500-500+4000 Excess of acquisition cost over book value            (42,000) Excess of fair value over book value: Accounts receivable                                    (500) Inventories                                (15,000) Land, buildings and equipment, net                              (220,000) Trademarks                               140,000 Developed technology                                   6,000 Noncurrent liabilities                                   5,000             84,500 Goodwill             42,500

Ref.

Description Debit Credit (E) Common stock 1000 Additional paid-in capital 80000 Retained earnings 5500 AOCI 500 Treasury stock 4000 Investment in Samson 72000 balancing figure (R) Trademarks 140000 Developed technology 6000 Noncurrent liabilities 5000 Accounts receivable 500 Goodwill 42500 Investment in Samson 42000 Inventories 15000 Land, buildings and equipment, net 220000

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