Advanced Accounting
Advanced Accounting
12th Edition
ISBN: 9781305084858
Author: Paul M. Fischer, William J. Tayler, Rita H. Cheng
Publisher: Cengage Learning
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Chapter 1, Problem 1.8P
To determine

Introduction: Acquisition is a corporate term used to represent purchase of another company and gaining the ownership of the company.

Whether it is gain on acquisition or goodwill.

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On June 30, 2018, Streeter Company reported the following account balances:On June 30, 2018, Princeton Company paid $310,800 cash for all assets and liabilities of Streeter, which will cease to exist as a separate entity. In connection with the acquisition, Princeton paid $15,100 in legal fees. Princeton also agreed to pay $55,600 to the former owners of Streeter contingent on meeting certain revenue goals during 2019. Princeton estimated the present value of its probability adjusted expected payment for the contingency at $17,900.In determining its offer, Princeton noted the following pertaining to Streeter:• It holds a building with a fair value $43,100 more than its book value.• It has developed a customer list appraised at $25,200, although it is not recorded in its financial records.• It has research and development activity in process with an appraised fair value of $36,400. However, the project has not yet reached technological feasibility and the assets used in the activity…
At January 1, 2018, Transit Developments owed First City Bank Group $600,000, under an 11% note with threeyears remaining to maturity. Due to financial difficulties, Transit was unable to pay the previous year’s interest.First City Bank Group agreed to settle Transit’s debt in exchange for land having a fair value of $450,000.Transit purchased the land in 2014 for $325,000.Required:Prepare the journal entry(s) to record the restructuring of the debt by Transit Developments.
Florida LLC owns and operates Bay Hotel in Tampa Florida. In July of year 20X5 Florida LLC entered into a sale agreement with ABC LLC, to sell the property to ABC for $39 million. ABC paid $9 million at the time the agreement was signed as a deposit and to be applied to the final purchase price. ABC LLC had two years to complete the purchase. In year 20X7 ABC LLC notified Florida LLC that it could not obtain the balance of the financing and it forfeited the total sum of the deposit. How should Florida LLC treat the $9 million on its tax return. (note in 20X4 Florida had a section §1231 Loss of $1.5 million) Under section § 1231 recapture, 20X4 had a loss of $1,500,000 could that be treated as ordinary income and $7,500,000 could be subject to capital gains tax?
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