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?