Calculation of Acquisition Cost

Cash paid to GP Shareholders 5,000

Fair value of IA stock issued 36,000
Fair value of earnings contigency 250
Acquisition Cost 41,250

Book Value of GP at the date of acquisition

Common stock 500
Additional paid in capital 8,500
Retained earnings (2,000)
Accumulated other comprehensive income (1,400)
Treasury stock (600)
Book value of GP 5,000

A. Schedule of calculating the excess of acquisition cost over GP's book values

Acquistion cost 41,250

GP book value 5,000
Excess of acquisition cost over book value (41,250 - 5,000) 36,250
Excess of fair value over book value:
Current Assets (1,200 - 1,000) 200
Fixed assets, net (20,000 - 27,000) (7,000)
Trademarks (6,000 - 3,400) 2,600
Licensing agreement 2,400
Order backlogs 5,000
long term liabilities (26,000 - 25,000) 1,000 4,200
Goodwill (36,250 - 3,000) 32,050
Note: Skilled workforce and Future synergies are not capitalized separately, they are inculded in Goodwill.
 Consolidated Working paper (in thousands)
Accounts Taken From Books Eliminations
International Auto Genuine Parts
Dr (Cr) Dr (Cr)
Current Assets 22,900 1,000 (R)
Fixed Assets, net 420,000 27,000
Investment in GP 41,250

Trademarks 89,000 3,400 (R)

Licensing Agreement - - (R)
Order backlogs - - (R)
Goodwill - - (R)
Current Liabilities (25,000) (400)
Long - term liabilities (350,250) (26,000) (R)
Common stock, par (10,000) (500) (E)
Additional paid in capital (143,100) (8,500) (E)
Retained earnings (43,800) 2,000
Accumulated other comprehensive income (4,000) 1,400
Treasury Stock 3,000 600
Total - -

Working Notes:
Calculation of Current Assets of International Auto:
Current Assets before acquistion 30,000
Less: Cash paid to GP shareholders (5,000)
Less: Cash paid to consultants and lawyers (1,200)
Less: Stock registeration (900)
Current Assets 22,900

Common stock of International Auto

Common stock before acquistion 8,000
Add: Common stock issued at par (1,000 × 2) 2,000
Common stock, par 10,000

Calculation of Additional paid in capital of International Auto:

Additional paid in capital before acquisition 110,000
Add: Shares issued to GP (36,000 - 2,000) 34,000
Less: Stock registeration fees (900)
Additional paid in capital 143,100

Retained Earnings of International Auto:

Retained earnings before acquisition 45,000
Less: Cash paid to consultants and lawyers (1,200)
Retained Earnings 43,800
Long term liabilites of Intenational Auto:
Long term liabilities before acquisition 350,000
Add: Fair value of earnings contigency 250
Long term liabilities 350,250
Entry E is to eliminate the stockholders' Equity of Subsidiary
Entry R is to record the fair value in excess of book value
aper (in thousands)
Eliminations
Consolidated
Debit Credit Balances Dr (Cr)
200 24,100
7,000 (R) 440,000
5,000 (E) -
36,250 (R)
2,600 95,000
2,400 2,400
5,000 5,000
32,050 32,050
(25,400)
1,000 (375,250)
500 (10,000)
8,500 (143,100)
2,000 (E) (43,800)
1,400 (E) (4,000)
- 600 (E) 3,000
52,250 52,250 -