Q1. How are direct combination costs, contingent consideration, and a bargain purchase reflected in recording an acquisition transaction?
Q2. Zaid Ltd and Zafar Ltd agreed to merge on January 1, 2019. On the date of the merger agreement, the companies reported the following data:
Cas & Receivables
Land & Building
Capital in excess of Par Value
Zaid Ltd has 15,000 shares of its $20 par value shares outstanding on January 1, 20X3, and Zafar Ltd has 10,000 shares of $5 par value stock outstanding. The market values of the shares are $400 and $75, respectively.
Zaid Ltd issues 1,000 shares of stock in exchange for all of Zafar Ltd’s net assets. Prepare a balance sheet for the combined entity immediately following the merger.
Q3. On January 1, 2016, ATM Corporation acquired all of the common stock of ZED Company for $300,000. On that date, ZED’s identifiable net assets had a fair value of $250,000. The assets acquired in the purchase of ZED are considered to be a separate reporting unit of ATM Corporation. The carrying value of ZED’s investment at December 31, 2016, is $310,000. The fair value of the net assets (excluding goodwill) at that date is $220,000 and the fair value of the reporting unit is determined to be 260,000.
1) Explain how goodwill is tested for impairment for a reporting unit.
2) Determine the amount, if any, of impairment loss to be recognized at December 31, 2016.
Q4. Gant Company purchased 20 percent of the outstanding shares of Temp Company for $70,000 on January 1, 20X6. The following results are reported for Temp Company:
Determine the amounts reported by Gant as income from its investment in Temp for each year and the balance in Gant’s investment in Temp at the end of each year assuming Gant uses the following methods in accounting for its investment in Temp:
c.Fair value method.
Q5. Acquisition at Other than Fair Value of Net Assets
Mason Corporation acquired 100 percent ownership of Best Company on February 12, 20X9. At the date of acquisition, Best Company reported assets and liabilities with book values of $420,000 and $165,000, respectively, common stock outstanding of $80,000, and retained earnings of $175,000. The book values and fair values of Best’s assets and liabilities were identical except for land which had increased in value by $20,000 and inventories which had decreased by $7,000. The estimated fair value of Best as a whole at the date of acquisition was $295,000.
Give the eliminating entries required to prepare a consolidated balance sheet immediately after the business combination assuming Mason acquired its ownership of Best for $280,000.
The overall level of rivalry may be seen as relatively intense for the Lego group in the run up until the end of 2004. Whilst Lego occupies a strong position in the market for construction toys with relatively few rivals one must consider that Lego is now competing in boarder market of children’s entertainment which in the lead up to 2004 began in include large incumbents from the electronics sector such as Sega and Nintendo. Power of buys The power of the buyer in the case of Lego may be seen as relatively high with low switching costs between alternative toys and even substitute products such as video games and television. Power of suppliers The power of suppliers may be seen as average, Lego’s products on the whole may be seen as largely based upon standardised inputs such as plastics and chemicals. There is the consideration that were Lego chooses to move into non-traditional areas such as sets associated with films or games the power of suppliers will increase as a key input becomes that of licences which is a form of intellectual property. Threat of substitutes This may be seen as the largest threat to the Lego group in the run up to the end of 2004. Although it is difficult to define what market a company occupies (Grant 2008, Porter 2004) for the purpose of considering the impact of substitution one must consider Lego to be a provider of children’s entertainment. In this case the threat from substitutes are rather high given that consumers may substitute between alternative traditional toys such as action figures or toy cars through to electronic products such as video games and television. Threat of new entrants The threat of new entrants into both the smaller traditional toys market and the wider children’s entrainments market may be seen as relatively low in the run up until 2004 largely for similar reasons. In order to enter these markets there is the requirement for significantly high levels of investment in both the form of capital investments and research and development costs both of which act as barriers to entry and thus restrict the number of new entrants (Porter 2004). SWOT analysis A key tool in considering the overall strategic fit is that of a SWOT analysis, a SWOT analysis considers both a company’s internal elements (Strengths and Weaknesses) and attempts to considers how these factors fit against the external elements of Opportunities and Threats (Lynch 2008). Strengths Lego’s key strengths may be seen as coming from both its brand recognition and its ability to use innovative technology without moving away from the company’s core values. Whilst there are many other competitors in the toy or children’s entertainment market Lego remains the brand of choice in the field of construction toys despite the fall of other long term historical brand such as Meccano (V&A 2010) and the rise of alternative substitute products such as video games (BBC News 2004). As the case study indicates despite the traditional nature of the Lego offering the company has a strong association with contemporary IT, design and manufacturing systems which help to make the product both more durable as well as helping to reduce manufacturing costs thus making the field of technology as key strength for the business. Weaknesses Lego’s key weakness in the run up to 2004 may be seen as two fold. Firstly the company has failed in a key area of the understanding of marketing in regard to understanding the needs of their customers which may be seen as the focal point of the marketing concept (Brassingt>GET ANSWER