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Example – Pitt Co. Data

Example – Pitt Co. Data

Tải bản đầy đủ - 40trang

Cash

Net receivables

Inventory

Land

Buildings, net

Equipment, net

Patents

Total assets

Accounts payable

Notes payable

Other liabilities

Total liabilities

Net assets



Book Val.

$ 50

150

200

50

300

250

0

$1,000

$ 60

150

40

$ 250

$ 750



© Pearson Education, Inc. publishing as Prentice



Fair Val.

$ 50

140

250

100

500

350

50

$1,440

$ 60

135

45

$ 240

$1,200

1-29



Acquisition with Goodwill

Pitt Co. pays $400,000 cash and issues 50,000

shares of Pitt Co. $10 par common stock with a

market value of $20 per share for the net assets

of Seed Co.

Total consideration at fair value (in thousands):

$400 + (50 shares x $20)

$1,400

Fair value of net assets acquired: $1,200

Goodwill

$ 200



© Pearson Education, Inc. publishing as Prentice



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Entries with Goodwill

The entry to record the acquisition of the net

assets:

Investment in Seed Co.

1,400

Cash

400

Common stock, $10 par

500

Additional paid-in-capital

500

The entry to record Seed’s assets directly on Pitt’s

books:

© Pearson Education, Inc. publishing as Prentice



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Cash

Net receivables

Inventories

Land

Buildings

Equipment

Patents

Goodwill

Accounts payable

Notes payable

Other liabilities

Investment in Seed Co.

© Pearson Education, Inc. publishing as Prentice



50

140

250

100

500

350

50

200

60

135

45

1,400

1-32



Acquisition with Bargain Purchase

Pitt Co. issues 40,000 shares of its $10 par

common stock with a market value of $20 per

share, and it also gives a 10%, five-year note

payable for $200,000 for the net assets of Seed

Co.

Fair value of net assets acquired (in thousands):

$1,200

Total consideration at fair value:

(40 shares x $20) + $200

$1,000

Gain from bargain purchase

$ 200

© Pearson Education, Inc. publishing as Prentice



1-33



Entries with Bargain Purchase

The entry to record the acquisition of the net

assets:

Investment in Seed Co.

1,000

10% Note payable

200

Common stock, $10 par

400

Additional paid-in-capital

400

The entry to record Seed’s assets directly on Pitt’s

books:

© Pearson Education, Inc. publishing as Prentice



1-34



Cash

Net receivables

Inventories

Land

Buildings

Equipment

Patents

Accounts payable

Notes payable

Other liabilities

Investment in Seed Co.

Gain from bargain purchase

© Pearson Education, Inc. publishing as Prentice



50

140

250

100

500

350

50

60

135

45

1,000

200

1-35



Goodwill Controversies

• Capitalized goodwill is the purchase price not

assigned to identifiable assets and liabilities.

– Errors in valuing assets and liabilities affect

the amount of goodwill recorded.

• Historically goodwill in most industrialized

countries was capitalized and amortized.

• Current IASB standards, like U.S. GAAP

– Capitalize goodwill,

– Do not amortize it, and

– Test it for impairment.

© Pearson Education, Inc. publishing as Prentice



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Impairments

• Firms must test annually for the impairment of

goodwill at the business unit reporting level.

– If the unit’s book value exceeds its fair value,

additional tests must be performed to

determine the impairment of goodwill and/or

other assets.

• More frequent testing for goodwill impairment

may be needed (e.g., loss of key personnel,

unanticipated competition, goodwill impairment

of subsidiary).

© Pearson Education, Inc. publishing as Prentice



1-37



Business Combination Disclosures

• FASB Statement No. 141R and 142 prescribe

disclosures for business combinations and

intangible assets. This includes, but is not limited

to:

– Reason for combination,

– Allocation of purchase price among assets and

liabilities,

– Pro-forma results of operations, and

– Goodwill or gain from bargain purchase.

© Pearson Education, Inc. publishing as Prentice



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Sarbanes-Oxley Act of 2002

• Establishes the PCAOB

• Requires

– Greater independence of auditors and clients

– Greater independence of corporate boards

– Independent audits of internal controls

– Increased disclosures of off-balance sheet

arrangements and obligations

– More types of disclosures on Form 8-K

• SEC enforces SOX and rules of the PCAOB

© Pearson Education, Inc. publishing as Prentice



1-39



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