On January 1, 2012, Innovus, Inc., acquired 100 percent of the common stock
Fair value of consideration transferred for ChipTech | $670,000 | |
Book value of ChipTech: | ||
Common stock and Additional Paid-in Capital (APIC) | $130,000 | |
Retained earnings | 370,000 | 500,000 |
Excess fair value over book value to | 170,000 | |
Trademark (10-year remaining life) | 40,000 | |
Existing technology (5-year remaining life) | 80,000 | 120,000 |
Goodwill | $ 50,000 |
The December 31, 2013, trial balances for the parent and subsidiary follow:
Innovus | ChipTech | |
|---|---|---|
Revenues | $ (990,000) | $(210,000) |
Cost of goods sold | 500,000 | 90,000 |
Depreciation expense | 100,000 | 5,000 |
Amortization expense | 55,000 | 18,000 |
Dividend income | (40,000) | '0' |
Net income | $ (375,000) | $ (97,000) |
Retained earnings 1/1/13 | $(1,555,000) | $(450,000) |
Net income | (375,000) | (97,000) |
Dividends paid | 250,000 | 40,000 |
Retained earnings 12/31/13 | $(1,680,000) | $(507,000) |
Current assets | $ 960,000 | $ 355,000 |
Investment in ChipTech | 670,000 | |
Equipment (net) | 765,000 | 225,000 |
Trademark | 235,000 | 100,000 |
Existing technology | '0' | 45,000 |
Goodwill | 450,000 | '0' |
Total assets | $ 3,080,000 | $ 725,000 |
Liabilities | $ (780,000) | (88,000) |
Common stock | (500,000) | (100,000) |
Additional paid-in capital | (120,000) | (30,000) |
Retained earnings 12/31/13 | (1,680,000) | (507,000) |
Total liabilities and equity | $(3,080,000) | $(725,000) |
- Required
Using Excel, compute consolidated balances for Innovus and ChipTech. Either use a worksheet approach or compute the balances directly.
Prepare a second spreadsheet that shows a 2013 impairment loss for the entire amount of goodwill from the ChipTech acquisition
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Rating:
/5
Solution: On January 1, 2012, Innovus, Inc., acquired 100 percent of the common stock