Grant Company acquired all of Bedford Corporation\'s assets and liabilities on J

Question

Grant Company acquired all of Bedford Corporation's assets and liabilities on January 1, 20X2, in a business combination. At that date, Bedford reported assets with a book value of $642,000 and liabilities of $364,000. Grant noted that Bedford had $45,000 of capitalized research and development costs on its books at the acquisition date that did not appear to be of value. Grant also determined that patents developed by Bedford had a fair value of $123,000 but had not been recorded by Bedford. Except for buildings and equipment, Grant determined the fair value of all other assets and liabilities reported by Bedford approximated the recorded amounts. In recording the transfer of assets and liabilities to its books, Grant recorded goodwill of $109,000. Grant paid $534,000 to acquire Bedford's assets and liabilities. If the book value of Bedford's buildings and equipment was $342,000 at the date of acquisition, what was their fair value?

Explanation / Answer

Hi Dear Student !

Fair Value of Building & Equipment can be Found as follows:-

Journal In the Books of Grant Co.

Particular. $. $.

Assets A/c......Dr. 255000
Goodwill A/c...Dr. 109000
Patent A/c.......Dr. 123000
Building (Balancing Fig.)
& EquipmentA/c..Dr. 411000

To Liabilities A/c. 364000
To Bedford A/c. 534000

(Being Business Purchased)

Working Note:-

Asset:- 642000- Building Book Value 342000- Value of Research & dev. exp 45000= $255000

Building & Equipment Fair Value:- 255000+109000-123000-364000-534000= $411000

Pleasure Teaching You !!

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