E52Date of Acquisition Consolidation with InProcess

E5.2 Date of Acquisition Consolidation with In-Process R&D

a. Calculation of goodwill:
Acquisition cost

$ 10,000,000
Fair value of noncontrolling interest

2,000,000
Total fair value

12,000,000
Book value of Saylor
$ 6,000,000

Fair value – book value:

Land 500,000

IPR&D
1,000,000
7,500,000
Goodwill

$ 4,500,000

Allocation of goodwill between controlling and noncontrolling interest:
Total goodwill
$ 4,500,000
Pennant’s goodwill: $10,000,000 – 80%(7,500,000)
4,000,000
Goodwill to noncontrolling interest
$ 500,000

b. Consolidated Financial Statement Working Paper

(E)
Stockholders’ equity – Saylor

6,000,000

Investment in Saylor (80%)

4,800,000

Noncontrolling interest in Saylor (20%)

1,200,000

(R)
Land

500,000

IPR&D

1,000,000

Goodwill

4,500,000

Investment in Saylor (1)

5,200,000

Noncontrolling interest in Saylor (2)

800,000
(1) 80% x (500,000 + 1,000,000) + 4,000,000
(2) 20% x (500,000 + 1,000,000) + 500,000

E5.3 Date of Acquisition Consolidation, Bargain Purchase

a.
Acquisition cost

$ 22,000,000
Fair value of noncontrolling interest

4,000,000
Total

26,000,000
Book value of Sparrow
$ 25,000,000

Fair value – book value:

Land
(800,000)

Other plant assets
2,000,000

Investments
1,500,000

Long-term debt
(700,000)

Fair value of identifiable net assets

27,000,000
Gain on acquisition

$ (1,000,000)

Peregrine’s acquisition entry:

Investment in Sparrow

23,000,000

Merger expenses 3,000,000

Cash

25,000,000

Gain on acquisition

1,000,000

b. Consolidated Financial Statement Working Paper

(E)
Stockholders’ equity – Sparrow

25,000,000

Investment in Sparrow (80%)

20,000,000

Noncontrolling interest in Sparrow (20%)

5,000,000

(R)
Other plant assets, net

2,000,000

Investments

1,500,000

Noncontrolling interest in Sparrow (1)

1,000,000

Land

800,000

Long-term debt

700,000

Investment in Sparrow (2)

3,000,000
(1) $5,000,000 – 4,000,000
(2) $23,000,000 –