01 Fischer10e SM Ch01 Final

8/12/2019 01 Fischer10e SM Ch01 Final

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CHAPTER 1

UNDERSTANDING THE ISSUES

1. (a) Horizontal combinationboth aremarine engine manufacturers

(b) Vertical combinationmanufacturerbuys distribution outlets

(c) Conglomerateunrelated businesses

2. By accepting cash in exchange for the netassets of the company, the seller wouldhae to recognize an immediate taxablegain! Howeer, if the seller were to acceptcommon stoc" of another corporation

instead, the seller could construct thetransaction as a tax#free reorganization!$he seller could then account for thetransaction as a tax#free exchange! $heseller would not pay taxes until the sharesreceied were sold!

3. %dentifiable assets (fair alue)!!!!!!! &',eferred tax liability

(&*, + -)!!!!!!!!!!!!!!!!!!!!!! (., )/et assets!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! !! &0*,

1oodwill2rice paid!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! !! &.0,/et assets!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!(0*,)

1oodwill!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! !! &33,

4. (a) $he net assets and goodwill will berecorded at their full fair alue on theboo"s of the parent on the date ofac4uisition!

(b) $he net assets will be 5mar"ed up6 tofair alue, and goodwill will be recordedat the end of the fiscal year when theconsolidated financial statements areprepared through the use of aconsolidated wor"sheet!

5. 2uncho will record the net assets at their

fair alue of &., on its boo"s! 7lso,2uncho will record goodwill of &8,(&9, : &.,) resulting from theexcess of the price paid oer the fair alue!;emos will record the remoal of its netassets at their boo" alues! ;emos willrecord a gain on the sale of business of&0, (&9, : &,)!

6. (a) Value 7nalysisand (fair alue)!!!!!!!!!!!!!!!!!!!!! .,Building ? e4uipment

(fair alue)!!!!!!!!!!!!!!!!!!!!!!!!!!!! ,Customer list (fair alue)!!!!!!!! *,>iabilities (fair alue)!!!!!!!!!!!!!!(8,)1oodwill!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! *.,$otal!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! & .,

(b) Value 7nalysisand (fair alue)!!!!!!!!!!!!!!!!!!!!! .,Building ? e4uipment

(fair alue)!!!!!!!!!!!!!!!!!!!!!!!!!!!! ,Customer list (fair alue)!!!!!!!! *,>iabilities (fair alue)!!!!!!!!!!!!!!(8,)1ain!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! (@, )$otal!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! & 0,

7. $he *A8 financial statements would bereised as they are included in the *A* :*A8 comparatie statements! $he *A*statements would be based on the new

alues! $he adustments would beand!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! @0,Building!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 3,E4uipment!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! *@0,1oodwill!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 80*,

>iabilities!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 8*,Cash!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! .,

Expenses (ac4uisition costs)!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 80,Cash!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 80,

(*) Cash!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! .,>iabilities!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 8,

7ccumulated epreciationBuilding!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! *,7ccumulated epreciationE4uipment!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 8,Current 7ssets!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! .,>and!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 0,Building!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 0,E4uipment!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 3,1ain on ;ale of Business!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 3*,

Note:;eller does not receie the ac4uisition costs!

(3) %nestment in Crow Company!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! .,Cash!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! .,

Expenses (ac4uisition costs)!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 80,

Cash!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 80,

Note:7t year#end, Crow would be consolidated with Bart, as explained in Chapter *!


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EXERCISE 1-2

Cash!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 8,%nentory!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! *0,E4uipment!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! **,>and!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 8.,

Buildings!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 3,1oodwillG!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! ',iscount on Bonds 2ayable!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 8,

Current >iabilities!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! .,Bonds 2ayable!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 00,Common ;toc"!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 3,2aid#%n Capital in Excess of 2ar!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 9,

7c4uisition Expense!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! *0,2aid#%n Capital in Excess of 2ar!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 8,

Cash!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 30,

G$otal considerationess fair alue of net assetsiabilities!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! *,


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Ch! 8:2roblems

PROBLEMS

PROBLEM 1-1

(8) 7c4uisition price &0,

$otal considerationess fair alue of net assets ac4uirediabilities!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 80,Bonds 2ayable!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 8,

Dr. = Cr. Check Totals 745,000 745,000


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Ch 8:2roblems

2roblem 8#8, Concluded

(*) 7c4uisition price &3,

$otal considerationess fair alue of net assets ac4uirediabilities!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 80,Bonds 2ayable!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 8,



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Ch! 8:2roblems

PROBLEM 1-2

$otal consideration for Vic"eriabilities!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 8',Bonds 2ayable!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 8,Common ;toc" (3, shares + &8 par)!!!!!!!!!!!!!!!!!!!!!!!!!! 3,2aid#%n Capital in Excess of 2ar!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 9,

Dr. = Cr. Check Totals 1,460,000 1,460,000

7c4uisition Expense!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 0,Cash!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 0,


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Ch 8:2roblems

2roblem 8#*, Concluded

$otal consideration for Rendaless fair alue of net assets ac4uiredand!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! ,Building!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 8*,

7ccounts payable!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! (, )Value of net identifiable assets ac4uired!!!!!!!!!!!!!!!!!!!!!!!! *,

Excess of total cost oer fair alue of net assets (goodwill)!!!!!! & .,

Riln Corporation ournal entriesand!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! ,Building!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 8*,1oodwill!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! .,

7ccounts 2ayable!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! ,Common ;toc"!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! *,2aid#%n Capital in Excess of 2ar!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 3,


(*) &3.0, consideration

$otal consideration for illiamsess fair alue of net assets ac4uiredand!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! ,Building!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 8*,

7ccounts payable!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! (, )Value of net identifiable assets ac4uired!!!!!!!!!!!!!!!!!!!!!!!! *,

Excess of fair alue of net assets oer cost (gain)!!!!!!!!!!!!!!!!!!!! & (30,)

Riln Corporation ournal entriesand!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! ,Building!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 8*,

1ain on 7c4uisition!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 30,7ccounts 2ayable!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! ,Cash!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 3.0,



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Ch! 8:2roblems

PROBLEM 1-5

$otal consideration for Ja"eiabilities!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! (8*,0)ebt Iaturing in ne Kear!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! (8,)

>ong#$erm ebt!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! (*.,)2ayroll and Benefit#Felated >iabilities!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! (80', )

Value of net identifiable assets ac4uired!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 0@,0Excess of total cost oer fair alue of net assets (goodwill)!!!!!!!!!!!!! & @*,0

Journal Entryand!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 00,

Building!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! *@0,E4uipment!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! *',2atents!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! *,$rade /ames!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 80,1oodwill!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! @*,0

7ccounts 2ayable!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 0,2ayroll and Benefit#Felated >iabilitiesCurrent!!!!!!!!!!!!!!!!!! 8*,0ebt Iaturing in ne Kear!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 8,>ong#$erm ebt!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! *.,2ayroll and Benefit#Felated >iabilities>ong#$erm!!!!!!!!!!!!! 80',Cash!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 0.,

Dr. = Cr. Check Totals 1,051,500 1,051,500

7c4uisition Expense!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! *,Cash!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! *,


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Ch! 8:2roblems

PROBLEM 1-7

(8) $otal consideration for ;mithiability!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 3@,0



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Ch 8:2roblems

2roblem 8#@, Concluded

(*) Feised estimate of contingent payment (&0, + 9-)!!!!!! &0,riginal estimate (&0, + @0-)!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 3@,0/et increase!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! & @,0

Journal Entryoss on Estimated Contingent >iability!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! @,0Estimated Contingent >iability!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! @,0

PROBLEM 1-8

$otal consideration for Jonesess fair alue of net assets ac4uirediabilities!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 8,/otes 2ayable!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 3,1ain on 7c4uisition of Business!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! *',Cash!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 80,



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Ch! 8:2roblems

PROBLEM 1-9

(8) Feported income for *A8Combined %ncome ;tatement

=or the 2eriod Ending ecember 38, *A8;ales reenue!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! &'*,

Cost of goods sold!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! **3,1ross profit!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! &39@,;elling expense!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! &8,

7dministratie expenses!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 8@*,0epreciation expense!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! *,00

7mortization expense!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 8,' 33,'0%ncome from operations!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! & 03,30ther income and expenses!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! @,%ncome before taxes!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! & ',302roision for income taxes!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 8.,80/et income!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! & *,*0


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Ch! 8:2roblems

2roblem 8#9, Continued

/ame of 7c4uiring Company< =aber Enterprises/ame of 7c4uired Company< 7nnOs $ool Company

%ncome ;tatement=or the Kear Ending ecember 38, *A8

($ax rate expressed as !3 for 3-)

=aber ' Io! 7nnOs 7dustments Combined%ncome ;tatement 7ccounts Enterprises $ool Co! ebit Credit %ncome ;tatement

;ales Feenue!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! (00,) (@,) !!!!!!!!!!!!!!! !!!!!!!!!!!!!!! !!!!!!!!!!!!!!!('*,)Cost of 1oods ;old!!!!! !! !! !! !! !! !! !! !! !! !! !! !! !! !! !! *, *0, !!! !! !! !! !! !! !! (8) *, !!!!! !! !! !! !! !! **3,1ross 2rofit!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! (30,) (0,) !!!!!!!!!!!!!!! !!!!!!!!!!!!!!! !!!!!!!!!!!!!!!(39@,);elling Expenses!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 8*0, 80, !!!!!!!!!!!!!!! !!!!!!!!!!!!!!! 8, !!!!!!!!!!!!!!!

7dministratie Expenses!!!!!!!!!!!!!!!!!!!!!!!!!!! 80, **,0 !!!!!!!!!!!!!!! !!!!!!!!!!!!!!! 8@*,0 !!!!!!!!!!!!!!!epreciation Expense=aber!!!!!!!!!!!!!!!!!! 83,. !!!!!!!!!!!!!!! !!!!!!!!!!!!!!! !!!!!!!!!!!!!!! 83,. !!!!!!!!!!!!!!!epreciation Expense7nnOs $ool!!!!!!!!!! !!!!!!!!!!!!!!! 3,@0 (*) 3, !!!!!!!!!!!!!!! ',@0 !!!!!!!!!!!!!!!

7mortization Expense=aber!!!!!!!!!!!!!!!!!! 0,' !!!!!!!!!!!!!!! !!!!!!!!!!!!!!! !!!!!!!!!!!!!!! 0,' !!!!!!!!!!!!!!!7mortization Expense7nnOs $ool!!!!!! !!!! !!!!!!!!!!!!!!! 8, (3) , !!!!!!!!!!!!!!! 0, !!!!!!!!!!!!!!!$otal perating Expenses!!!!!!!!!!!!!!!!!!!!!!!! *9, *,*0 !!!!!!!!!!!!!!! !!!!!!!!!!!!!!! !!!!!!!!!!!!!!! 33,'0perating %ncome!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! (00,') (*,@0) !!!!!!!!!!!!!!! !!!!!!!!!!!!!!! !!!!!!!!!!!!!!! (03,30)/onoperating Feenues and Expensesess fair alue of net assets ac4uiredand!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! ,Building!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! .0,E4uipment!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 0,2atent!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 8*,Copyright!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! *',

7ccounts payable!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! (**,)%nterest payable!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! (*,)/otes payable!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! (, )

Value of net identifiable assets ac4uired!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! *9,Excess of total cost oer fair alue of net assets (goodwill)!!!!!!!!!!!!! & *8,


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Ch! 8:2roblems

2roblem 8#8, Continued

Journal Entryand!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! ,Building!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! .0,E4uipment!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 0,2atent!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 8*,Copyright!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! *',1oodwill!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! *8,

7ccounts 2ayable!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! **,%nterest 2ayable!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! *,/otes 2ayable!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! ,Common ;toc" (8, shares + &0 par)!!!!!!!!!!!!!!!!!!!!!!!!!!!! 0,2aid#%n Capital in Excess of 2ar (&*@, : &0,)!!!!!!!! **,


7c4uisition Expense!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 8,Cash!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 8,

2art B

;ummary disclosureand!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 0,Buildings!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 0,E4uipment!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! ',

7ccounts payable!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! (8*,)%ncome tax payable!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! (89, )

Value of net identifiable assets ac4uired!!!!!!!!!!!!!!!!!!!!!!!! 8,3,Excess of fair alue of net assets oer cost (gain)!!!!!!!!!!!!!!!!!!!! & (*3, )

Journal Entryife 7dustment

=ilm costs (ec! 38, *0) 8.* 03. 30' 8* (3)Buildings and e4uipment

(ec! 38, *0) 8*0 **0 8 8' (')%ntangibles *33 *33 8@ (8)

7dusted combined income *,'3'

isney ;hares iluted Basic

ec! 38, *0, aerage *,'@ *,3%ssued in ac4uisition of 2ixar *@9 *@9

$otal shares *,3' *,3**

2roected E2; &8!8* &8!8

2roected isney only &8!*3 &8!*

Based on this information, E2; would be diluted by the ac4uisition!

$he *0 pro forma numbers may benefit from improed operating performance by thecombined firm and the one#time gain on the contract termination!

01 Fischer10e SM Ch01 Final

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