On July 1 2015 Faber Enterprises acquired Ann s Tool

Company #6211
On July 1, 2015, Faber Enterprises acquired Ann's Tool Company. Prior to the merger of the
two companies, each company calculated its income for the entire year ended December 31,
2015. (It may be assumed that all Ann amounts occurred evenly over the year.) These
estimates are as follows:An analysis of the merger agreement revealed that the purchase price
exceeded the fair value of all assets by $40,000. The book and fair values of Ann's Tool
Company on July 1, 2015, are given in the table below along with an estimate of the useful lives
of each of these asset categories.Management believes the company will be in a combined tax
bracket of 30%. The company uses the straight-line method of computing depreciation and
amortization and assigns a zero salvage value.1. Using the above information, prepare the
Faber Enterprises income statement for the year ending December 31, 2015. Provide
supporting calculations.2. Prepare the required summarized disclosure of 2015 results if the
acquisition occurs at the start of the year.View Solution:
On July 1 2015 Faber Enterprises acquired Ann s Tool Company

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