Public Equity Corporation acquired Lenore Company through an exchange of common

Question

Public Equity Corporation acquired Lenore Company through an exchange of common shares. All of Lenore's assets and liabilities were immediately transferred to Public Equity. Public's common stock was per share at the time of exchange. Following selected information is also available. trading at $20 Public Equity Par value of shares outstanding Additional paid-in capital Before acquisition Ateracquisition $250,000 $550,000 $200,000 $350,000 7. Based on the preceding information, what is the fair value of Lenore's net assets, if goodwill of $56,000 is recorded? A. $306,000 -B. $244,000 C. $194,000 50 D. $300,000 Su 8. Paul Corp. acquired 100 percent of Sam Inc.'s voting stock on July 1, 20X1. The following information was available as of December 31, 20X1: Net Income Jan 1- June 30, 20X1 $300,000 $150,000 Net Income July 1, 20X1-Dec 31, 20X1 $420,000 $220,000 Paul Corp. Sam Inc. How much net income should be reported in Paul Corp's income statement for 20X1? A. $370,000 B. $720,000 . $940,000 D. $1,090,000

Explanation / Answer

1) Based on the preceding information, what is the fair value of Lenore's net assets, if goodwill of $56,000 is recorded?

Solution: 194,000

Explanation: 250,000 (after acquisition par value of shares outstanding) - 56,000 = 194,000

2) Paul Corp. acquired 100 percent of Sam Inc's voting stock on July 1. The following information was available as of December 31. How much net income should be reported in Paul Corp’s income statement for 20X1

Solution: 940,000

Working: 300,000 + 420,000 + 220,000 = 940,000

Paul Corp. acquired 100 percent of Sam Inc's voting stock on July 1 thus 220,000 would be included in the Paul Corp’s income statement

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