Maurice Tutor
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On January 1, 2010, Innovus, Inc., acquired 100 percent of the common stock of ChipTech Company for $670,000 in cash and other fair-value consideration. ChipTech’s fair value was allocated among its net assets as follows:
|
Fair value of consideration transferred for ChipTech |
$670,000 |
|
|
Book value of ChipTech: |
||
|
Common stock and 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, 2011, 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 1/1/11 |
($1,555,000) |
($450,000) |
|
Net income |
375,000 |
97,000 |
|
Dividends paid |
250,000 |
40,000 |
|
Retained earnings 12/31/11 |
($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 12/31/11 |
1,680,000 |
507,000 |
|
Total liabilities and equity |
($3,080,000) |
($725,000) |
Required
a. Using Excel, compute consolidated balances for Innovus and ChipTech. Either use a worksheet approach or compute the balances directly.
b. Prepare a second spreadsheet that shows a 2011 impairment loss for the entire amount of goodwill from the ChipTech acquisition.