PR Company pays $20,000 in cash and issues stock with a fair value of $50,000 to acquire all of SX Corporation’s stock. SX will be a subsidiary of PR. Balance sheet accounts just prior to the acquisition are as follows, in trial balance format:
| PR Company | SX Corporation | ||
|---|---|---|---|
| Book value | Book value | Fair value | |
| Dr (Cr) | Dr (Cr) | Dr (Cr) | |
| Current assets | $12,000 | $ 5,500 | $ 7,300 |
| Property, plant & equipment, net | 108,000 | 12,000 | 9,500 |
| Identifiable intangible assets | 2,000 | 8,000 | 15,000 |
| Current liabilities | (10,000) | (4,300) | (4,900) |
| Long-term debt | (60,000) | (16,000) | (13,500) |
| Capital stock | (44,600) | (5,000) | |
| Retained earnings | (8,000) | (10,500) | |
| Accumulated other comprehensive income | (200) | 1,000 | |
| Treasury stock | 800 | 9,300 | |
| Total | $ 0 | $ 0 | |
PR’s consultants find these items that are not reported on SX’s balance sheet:
| Fair value | |
|---|---|
| Potential contracts with new customers | $ 5,000 |
| Advanced production technology | $4,500 |
| Future cost savings | $2,000 |
| Customer lists | $2,500 |
Outside consultants are paid $200 in cash, and registration fees to issue PR’s new stock are $500.
On the consolidation working paper at the date of acquisition, elimination (R) debits identifible intangible assets by
A. $1,000
B. $13,000
C. $14,000
D. $23,000
