Question

EXCEL CASE 1 On January 1, 2017, Innovus, Inc., acquired 100 percent of the common stock of ChipTech

Company for $670,000 in cash and other fair-value consideration. ChipTech’s fair value was allocated among its net assets as follows:

Fair value of consideration transferred for ChipTech

$670,000

Book value of ChipTech:

Common stock and Additional Paid-In Capital (APIC)

$130,000

Retained earnings

370,000

500,000

Excess fair value over book value to

170,000

Trademark (10-year remaining life)

$ 40,000

Existing technology (5-year remaining life)

 80,000

 120,000

Goodwill

$ 50,000

The December 31, 2018, trial balances for the parent and subsidiary follow (there were no intra-entity payables on that date):

 Innovus

ChipTech

Revenues

$  (990,000)

$  (210,000) 

Cost of goods sold

    500,000

    90,000 

Depreciation expense

    100,000

     5,000 

Amortization expense

     55,000

    18,000 

Dividend income

     (40,000)

-0- 

Net income

$  (375,000)

$ (97,000)

Retained earnings 1/1/18

$ (1,555,000)

$ (450,000)

Net income

    (375,000)

    (97,000)

Dividends declared

250,000

40,000 

Retained earnings 12/31/18

$ (1,680,000)

$ (507,000)

Current assets

$   960,000 

$ 355,000 

Investment in ChipTech

    670,000

Equipment (net)

    765,000

   225,000 

Trademark

    235,000

   100,000 

Existing technology

        -0-

    45,000 

Goodwill

450,000

-0- 

Total assets

$ 3,080,000 

$ 725,000 

Liabilities

$  (780,000)

    (88,000) 

Common stock

    (500,000)

   (100,000)

Additional paid-in capital

    (120,000)

    (30,000)

Retained earnings 12/31/18

  (1,680,000)

   (507,000)

Total liabilities and equity

$ (3,080,000)

$ (725,000)

Required

 

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