Balance Sheet and Fair Value
Allfoods Corp. (Allfoods) acquired 80 percent of the outstanding common stock of Baked Beans Corp. in a business combination. After value consideration transferred value of tangible and intangible assets acquired, libilities assumed, I recommend doing this consolidation general entry for the business combination: Dr. | Land | $ 21,000,000 | | | | Dr. | PPE | $ 7,000,000 | | | | Dr. | IPR&D | $ 15,000,000 | | | | Dr. | Trademark | $ 3,000,000 | | | | Dr. | Goodwill | $ 122,750,000 | | | | | | | Cr. | Cash | $40,000,000 | | | | Cr. | C/S | $70,000,000 | | | | Cr. | APIC | $ 5,000,000 | | | | Cr. | NCI | $ 33,750,000 |
Here are the reasons that I suggest to make that general entry:
Determine Consideration Transferred
To acquire 80% of the outstanding common stock of Baked Beans Corp, the amount of consideration Allfoods Corp. transferred is: (in millions) (1) Cash 40 (2) Common Stock 70 (3) Contingient Consideration 20 (4) -------------------------------------------------
Cost of precobination option exchange 5 Total 135
(2) Common stock (C/S) is 2 million shares at $35/share. (3) Contingent consideration is recorded at fair value at acquisition-date.
(ASC 805-30-Currently Viewing:805 Business Combinations25-5) In this case, the contingent consideration is classified as equity since it settled in shares. (ASC 815-40-25-4) The contingient consideration goes into additional paid in capital account (APIC) on the Allfoods’ balance sheet. (4) Exchange of share options in conjunction with a business combination is modification of share-based payment awards. The portion attributable to precombination service is part of the consideration transferred. (ASC 805-30-30) The underlying shares for stock options are not liabilities and there is no cash settlement, so the exchange of stock option is classified as an equity (ASC 718-10-25-11), and
Here are the reasons that I suggest to make that general entry:
Determine Consideration Transferred
To acquire 80% of the outstanding common stock of Baked Beans Corp, the amount of consideration Allfoods Corp. transferred is: (in millions) (1) Cash 40 (2) Common Stock 70 (3) Contingient Consideration 20 (4) -------------------------------------------------
Cost of precobination option exchange 5 Total 135
(2) Common stock (C/S) is 2 million shares at $35/share. (3) Contingent consideration is recorded at fair value at acquisition-date.
(ASC 805-30-Currently Viewing:805 Business Combinations25-5) In this case, the contingent consideration is classified as equity since it settled in shares. (ASC 815-40-25-4) The contingient consideration goes into additional paid in capital account (APIC) on the Allfoods’ balance sheet. (4) Exchange of share options in conjunction with a business combination is modification of share-based payment awards. The portion attributable to precombination service is part of the consideration transferred. (ASC 805-30-30) The underlying shares for stock options are not liabilities and there is no cash settlement, so the exchange of stock option is classified as an equity (ASC 718-10-25-11), and