Maurice Tutor
$15/per page/Negotiable
On January 1, 2012, 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 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:
| Â |
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) |
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