Consolidation questions
Problem 3-38 (LO 3-4, 3-6) On January 1, Prine, Inc., acquired 100 percent of Lydia Company’s common stock for a fair value of $130,869,000 in cash and stock. Lydia’s assets and liabilities equaled their fair values except for its equipment, which was undervalued by $690,000 and had a 10-year remaining life. Prine specializes in media distribution and viewed its acquisition of Lydia as a strategic move into content ownership and creation. Prine expected both cost and revenue synergies from controlling Lydia’s artistic content (a large library of classic movies) and its sports programming specialty video operation. Accordingly, Prine allocated Lydia’s assets and liabilities (including $55,551,000 of goodwill) to a newly formed operating segment appropriately designated as a reporting unit. The fair…
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