Reference no: EM132380160

Question

On Jan 2, 2017. Boomer Corporation acquires 100% Bruin corporation for $30,000,000. At the time of the merger, Bruin's Book Value is $2,000,000. In addition, Bruin's LTD was overvalued by $400,000 (4 years remaining), PPE was undervalued by $7,000,000 (10 years remaining) and a patent that resulted from a previous acquisition by Bruin that was overvalued by $2,000,000 with 5 remaining years.

They had unrecorded assets of: a sales backlog of $1,000,000 that was going to take 2 years to clear and favorable leases valued at $3,000,000 with 5 remaining years.

It is now 2020, (4 years later) calculate the original purchase price and the equity in Bruin's income assuming Bruin had net income of $2,000,000 in 2020. In 2020, Boomer determined that the goodwill related to the purchase of Boomer was impaired by $200,000. Goodwill had been previously impaired by $5,000,000.