On January 1, 2003, Fishing Creek Company purchased Skull Valley Technologies for $8,800,000 cash....

Question

On January 1, 2003, Fishing Creek Company purchased Skull Valley Technologies for $8,800,000 cash. The book value and fair value of Skull Valley s assets as of the date of the acquisition are listed below:

Book

Market

Value

Cash

$100,000

Accounts receivable

500,000

Inventory

950,000

1,200,000

Property, plant, and

1,500,000

1,900,000

Trademark

0

2,000,000

Totals

$3,050,000

$5,700,000

In addition, Skull Valley had liabilities totaling $4,000,000 at the time of the acquisition.
1. At what amount will Skull Valley s trademark be recorded on the books of Fishing Creek, the acquiring company?
2. How much goodwill will be recorded as part of this acquisition?
3. How much goodwill amortization expense will Fishing Creek recognize in 2003? What assumptions are necessary to answer this question?
4. Interpretive Question: What was Skull Valley s recorded stockholders equity immediately before the acquisition? Under what circumstances does stockholders equity yield a poor measure of the fair value of a company?

Robert · Accepted Answer

On January 1, 2003, Fishing Creek Company purchased Skull Valley Technologies for $8,800,000 cash. The book value and fair value 
of Skull Valley s assets as of the date of the acquisition are listed below: 
 
Book Market 
 
Value Value 
Cash $100,000 $100,000 
Accounts receivable 500,000 500,000 
Inventory 950,000 1,200,000 
Property, plant, and 1,500,000 1,900,000 
Trademark 0 2,000,000 
Totals $3,050,000 $5,700,000 
In addition, Skull Valley had liabilities totaling $4,000,000 at the time of the acquisition. 
1.

On January 1, 2003, Fishing Creek Company purchased Skull Valley Technologies for $8,800,000 cash. The book value and fair value of Skull Valley s assets as of the date of the acquisition are listed...

Solution

Answer To This Question Is Available To Download

Related Questions & Answers

Submit New Assignment