Reference no: EM132702709
Arizona Corp. had the following account balances at 12/1/19:
Receivables: $96,000;
Inventory: $240,000;
Land: $720,000;
Building: $600,000;
Liabilities: $480,000;
Common stock: $120,000;
Additional paid-in capital: $120,000;
Retained earnings, 12/1/19: $840,000;
Revenues: $360,000; and
Expenses: $264,000.
Several of Arizona's accounts have fair values that differ from book value. The fair values are:
Land - $480,000;
Building - $720,000;
Inventory - $336,000; and
Liabilities - $396,000.
Inglewood Inc. acquired all of the outstanding common shares of Arizona by issuing 20,000 shares of common stock having a $6 par value, but a $66 fair value. Stock issuance costs amounted to $12,000.
Arizona Corp. Fill in the amount below.
(Replace the ? Below with your answer)
Inglewood Fair Value Allocation Schedule
December 1, 2019
Payment by Inglewood ($66 fair value x 20,000 sh) 1320000
Book value of Arizona Corp. (assets - liabilities) 1176000
Excess of fair value over book value 144000
Allocation to specific accounts between fair value and book value:
Inventory (undervalued) 96000
Land (overvalued) -240000
Building (undervalued) 120000
Liabilities 84000
Goodwill 84000
Problem 1: Imagine you are the decision maker at Inglewood Inc. Determine in whether you would encourage acquiring Arizona Corp?