Consolidated Working Paper, Identifiable Intangibles, Goodwill International Tec
ID: 2421976 • Letter: C
Question
Consolidated Working Paper, Identifiable Intangibles, Goodwill
International Technology Inc. (ITI) acquires all of the voting stock of Global Outsourcing Corporation (GOC) on June 30, 2015. Amounts paid are as follows (in millions):
The earnings contingency provides for a potential payout to the former shareholders of GOC at the end of the third year following acquisition. The balance sheets of both companies immediately prior to the acquisition are as follows. Fair values of GOC's assets and liabilities at the date of acquisition are also provided.
The intangible assets reported above consist of patents and trademarks. GOC also has the following previously unreported intangible assets that meet FASB ASC Topic 805 requirements for asset recognition:
Required
(a) Prepare the journal entry or entries ITI makes to record the acquisition on its own books (in millions and enter all decimal places).
(b) Prepare a working paper to consolidate the balance sheets of ITI and GOC at June 30, 2015.
Enter answers in millions and enter all decimal places. Remember to use negative signs with your credit balance answers in the Dr (Cr) columns.
Cash consideration to the former shareholders of GOC $50 2,000,000 shares of new $1 par common stock issued 60 Registration fees on new stock issued, paid in cash 3 Outside legal and advisory services, paid in cash 5 Fair value of earnings contingency 2Explanation / Answer
Consolidated income statement:
Consolidated Statement of
Comprehensive Income for Fiscal 2018 (in millions)
Sales revenue
($8,700)
Costs of goods sold
6,600
Gross margin
(15,300)
Operating expenses:
Goodwill impairment loss
$21
Other operating expenses
2,004
(2,025)
Net Loss
($17,325)
Other comprehensive income
9
Comprehensive income
($17,316)
Consolidated balance sheet
Consolidated Balance Sheet, June 30, 2018
Assets
Current assets
$732
Property, plant and equipment, net
2,220
Identifiable intangible assets
3,390
Goodwill
0
Investment in GOC
381
Total assets
$6,723
Liabilities and stockholders' equity
Current liabilities
$555
Long-term liabilities
3,690
Common stock
78
Additional paid-in capital
1,920
Retained earnings
298
Accumulated other comprehensive income
60
Treasury stock
30
Total liabilities and stockholders' equity
$6,723
Consolidated Statement of
Comprehensive Income for Fiscal 2018 (in millions)
Sales revenue
($8,700)
Costs of goods sold
6,600
Gross margin
(15,300)
Operating expenses:
Goodwill impairment loss
$21
Other operating expenses
2,004
(2,025)
Net Loss
($17,325)
Other comprehensive income
9
Comprehensive income
($17,316)