(Solution) - Par Corporation acquired all the stock of Sad Corporation on -(2025 Original AI-Free Solution)

Paper Details

Par Corporation acquired all the stock of Sad Corporation on January 1, 2011, for $280,000 cash, when the book values and fair values of Sad?s assets and liabilities were as follows (in thousands):

Sad?s buildings have a remaining life of 10 years, and the equipment has a useful life of 2 years from the date of the combination. During 2011, Sad had income of $50,000 and paid dividends of $20,000. Par and Sad are subject to a 35 percent tax rate.
REQUIRED
1. Prepare a schedule to allocate the excess fair value over book value to Sad?s assets, liabilities, deferred taxes, and goodwill at January 1, 2011, assuming the purchase was a taxable transaction.
2. Prepare a schedule to allocate the excess fair value over book value to Sad?s assets, liabilities, deferred taxes, and goodwill at January 1, 2011, assuming the purchase was a tax-free reorganization.
3. Compute Par?s income from Sad for 2011 under both options.