Bread Ltd. acquired Biscuit Ltd. on July 1, 20X1. The pre-combination statements of financial position for the two companies and the fair values of their assets and liabilities are presented attached. the deferred development costs are unamortized and related to products that will be on the market in early 20X2. Both companies expect that the deferred development costs to be fully recovered in future years Bread Ltd Biscuit Ltd. Carrying Value Fair value Carrying Value Fair value Asset Current Asset Cash 2,115,000.00 2,115,000.00 900,000.00 900,000.00 Account Receivable 1,800,000.00 1,800,000.00 1,800,000.00 1,800,000.00 3,915,000.00 2,700,000.00 Noncurrent assets Land 4,500,000.00 7,650,000.00 Equipment 12,150,000.00 9,900,000.00 7,560,000.00 9,900,000.00 Deferred development cost 540,000.00 675,000.00 2,790,000.00 3,600,000.00 17,190,000.00 10,350,000.00 Total assets 21,105,000.00 13,050,000.00 Liabilities and shareholder’s Equity Current Liabilities Accounts Pyable 585,000.00 585,000.00 990,000.00 990,000.00 Noncurrent Liabilities – – – – Notes Payable 1,800,000.00 1,800,000.00 900,000.00 810,000.00 Total Liabilities 2,385,000.00 1,890,000.00 Shareholder’s Equity Common shares 13,500,000.00 6,255,000.00 Retained Earnings 5,220,000.00 4,905,000.00 18,720,000.00 11,160,000.00 21,105,000.00 13,050,000.00 Bread: 1,000,000 common shares OutstandingBiscuit: 312750 common shares OutstandingA.Assume that Bread purchased the assets of Biscuit and assumed it’s liabilities by paying $1,800,000 in cash and issuing a note payable for $16,200,000. Calculate thr following balances:iGoodwilliiDeferred Development costsB.Assume that Bread acquired Biscuit by purchasing all of Biscuit’s outstanding shares. Bread made the acquisition by paying the shareholders cash of $900,000 and giving them new shares worth $12,150,000. Calculate the following balances that would appear on Bread’s consolidated statement of financial position immediately after the purchase: iGoodwilliiRetained Earnings
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