Answer:
Prima Inc.
1. c. Decrease depreciation expense and recognize no goodwill amortization
Rudd Corporation:
2. The amounts of Amortization and Goodwill Expense to be reported in Rudd's 20X8 financial statements are:
= d. $ 0 $ 0
3. The amount of the intercompany loans and profits that should be eliminated are:
. $100,000 $300,000
4. The amount of goodwill that should be reported as a result of this business combination is:
= c. $400,000.
Explanation:
Data and Calculations:
2. Recorded goodwill = $100,000
Estimated useful life = 5 years
Amortization and Goodwill Expense = $0
3. Intercompany loans = $100,000
Intercompany profits = $300,000
4. Long Corp.'s
Cost Fair Value
Cash $ 160,000 $ 160,000
Inventory 480,000 460,000
Property, plant and equipment (net) 980,000 1,040,000
Liabilities (360,000) (360,000)
Net assets $1,260,000 $1,300,000
Payment = $1,700,000
Goodwill (acquired) = $400,000 ($1,700,000 - $1,300,000)
