Question

On July 1, 2024, Kroger Inc. acquired Hole Foods for $500M cash and a $250M Note payable to the Bank of New York. The balance sheet on that date for Hole Foods is as follows: Hole Foods Accounts Payable Stockholders' Equity $200,000 235,000 Balance Sheet July 1, 2024 (in thousands) $50,000 90,000 100,000 40,000 75,000 70,000 10,000 $435,000 $435,000 Cash Accounts Receivable Inventory Land Buildings (net) Equipment (net) Trademarks Totals The recorded amounts (book values) all approximate fair value except for Land (Fair Value $80M) Inventory (Fair Value is $150M and Trademarks (Fair Value $50M). Instructions: Answer the following questions for Kroger's acquisition of Hole Foods. Determine the amount of Goodwill, if any, that Kroger should recognize. 2. On December 31, 2024, the Fair Value of Kroger's Goodwill is estimated to be $300M. Under GAAP, is Kroger required to record any adjusting entries or disclosures. If so, what amount would be recorded as an adjustment to Kroger's books.

          On July 1, 2024, Kroger Inc. acquired Hole Foods for $500M cash and a $250M Note payable to the Bank of New York. The balance sheet on that date for Hole Foods is as follows: Hole Foods Accounts Payable Stockholders' Equity $200,000 235,000 Balance Sheet July 1, 2024 (in thousands) $50,000 90,000 100,000 40,000 75,000 70,000 10,000 $435,000 $435,000 Cash Accounts Receivable Inventory Land Buildings (net) Equipment (net) Trademarks Totals The recorded amounts (book values) all approximate fair value except for Land (Fair Value $80M) Inventory (Fair Value is $150M and Trademarks (Fair Value $50M). Instructions: Answer the following questions for Kroger's acquisition of Hole Foods. Determine the amount of Goodwill, if any, that Kroger should recognize. 2. On December 31, 2024, the Fair Value of Kroger's Goodwill is estimated to be $300M. Under GAAP, is Kroger required to record any adjusting entries or disclosures. If so, what amount would be recorded as an adjustment to Kroger's books.

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Horngren’s Cost Accounting

Srikant M. Datar, Madhav V. Rajan 16th Edition

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Solved by Expert Supreeta N

08/30/2023

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On July 1, 2024, Kroger Inc. acquired Hole Foods for $500M cash and a $250M Note payable to the Bank of New York. The balance sheet on that date for Hole Foods is as follows: Hole Foods Accounts Payable Stockholders' Equity $200,000 235,000 Balance Sheet July 1, 2024 (in thousands) $50,000 90,000 100,000 40,000 75,000 70,000 10,000 $435,000 $435,000 Cash Accounts Receivable Inventory Land Buildings (net) Equipment (net) Trademarks Totals The recorded amounts (book values) all approximate fair value except for Land (Fair Value $80M) Inventory (Fair Value is $150M and Trademarks (Fair Value $50M). Instructions: Answer the following questions for Kroger's acquisition of Hole Foods. Determine the amount of Goodwill, if any, that Kroger should recognize. 2. On December 31, 2024, the Fair Value of Kroger's Goodwill is estimated to be $300M. Under GAAP, is Kroger required to record any adjusting entries or disclosures. If so, what amount would be recorded as an adjustment to Kroger's books.

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Transcript

00:01 Hello students, here is a question.

00:02 Mana ltd.

00:03 Enters into a business combination with noa inc, in which mana purchases all the identifiable assets and liabilities of a noa inc.

00:13 The effect of a business combination of mana issued 50 ,000 of its common share.

00:18 Currently, the trading at $8 per share for all the noa's not identifiable assets.

00:24 Mana is considered to be the clear acquirer.

00:27 Cost associated with a business combination are legal appraisal and fidr fees is $5 ,000 cost of issuing shares and 7 ,000 total cost is 12 ,000.

00:38 And there are some balance sheet given in the question, balance sheet information as we have assets and liabilities.

00:46 So we need to calculate the goodwill for this problem.

00:49 So let us start solving this.

00:55 So here we need to make a note that cost of issuing equity security are changed to the share premium or additional paid -in capital account.

01:04 Since there is no given initial balance for the share premium, cost of issuing securities were charged on common shares account.

01:14 And the second thing is all nominal accounts are dated acquisition are charged to the retained earnings account.

01:21 So let us calculate the goodwill now.

01:26 Calculation of goodwill.

01:31 So for this calculation of goodwill, so the format is particulars amount.

01:38 So the first item will be cash.

01:46 So cash is 52 ,500 and then account receivable...

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