Problem 3
Determine selected consolidated balances at date of acquisition (10 points)
Flynn acquires 100 percent of the outstanding voting shares of Macek Company on January 1, 2013.
To obtain these shares, Flynn pays $400 cash (in thousands) and issues 10,000 shares of $20 par
value common stock on this date. Flynn's stock had a fair value of $36 per share on that date. Flynn
also pays $15 (in thousands) to a local investment firm for arranging the acquisition. An additional
$10 (in thousands) was paid by Flynn in stock issuance costs.
The book values for both Flynn and Macek as of January 1, 2013 follow. The fair value of each
of Flynn and Macek accounts is also included. In addition, Macek holds a fully amortized trademark
that still retains a $40 (in thousands) value. The figures below are in thousands. Any related question
also is in thousands.
Flynn, Inc.
Macek Company Book Value Fair Value $ 80 $80 180 160 260 300 120 130 220 280 100 75 60 60 340 300 80 0 480
Cash $ 900 Receivables 480 Inventory 660 Land 300 Buildings (net) 1,200 Equipment 360 Accounts payable 480 Long-term liabilities 1,140 Common stock 1,000 Additional paid-in capital 200 Retained earnings 1,080
What are the consolidated balances for the following accounts at date of acquisition? Please show
the calculation clearly. a. Inventory. b. Goodwill. c. Additional paid-in capital. d. Retained earnings. e. Cash (after the completion of the acquisition)
