In 2016, Plummer Corporation acquired the net assets of Singer Company. The purchase price was...
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Accounting
In 2016, Plummer Corporation acquired the net assets of Singer Company. The purchase price was $85 million. Plummer's annual reports for 2016 and 2017 provide the following information (in millions):
2016
Changes
2017
Net assets acquired:
Cash and receivables
$15
$-
$15
Inventories
135
(15)
120
Plant and equipment, net
120
(10)
110
Identiable intangible assets
65
10
75
Goodwill
400
20
420
Current liabilities
(50)
-
(50)
Long-term liabilities
(600)
(15)
(615)
Acquisition cost
$85
$(10)
$75
The change in acquisition cost is a reduction in the fair value of an earnings contingency.
a. Did the changes in value between 2016 and 2017 occur within the measurement period?
Answer:
Yes, the value changes occurred during the measurement period. We know this because the fair value for cash and receivables has not been adjusted.
No, the value changes occurred after the measurement period. We know this because the fair value for cash and receivables has not been adjusted.
No, the value changes occurred after the measurement period. We know this because goodwill is adjusted, implying that the initial acquisition entry has been corrected.
Not enough information is presented in the question to determine if the change s in value occur within the measurement period.
Yes, the value changes occurred during the measurement period. We know this because goodwill is adjusted, implying that the initial acquisition entry has been corrected.
b. Prepare the entry Plummer made in 2017 to adjust the 2016 acquisition values. Enter your answers in millions.
General Journal
Description
Debit
Credit
Identifiable intangible assets
Answer
Answer
Goodwill
Answer
Answer
Answer: Long-term liabilities/Goodwill/Equity in net income of Singer/Investment in Singer/Earnout liability
Answer
Answer
Inventories
Answer
Answer
Plant and equipment, net
Answer
Answer
Answer: Equity in net income of Singer/Goodwill/Investment in Singer/Earnout liability/Long-term liabilities
Answer
Answer
Answer & Explanation
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