Passcode Incorporated Acquired 90% of Safe Systems International for $540,000

question 16

Essay

Passcode Incorporated acquired 90% of Safe Systems International for $540,000, the market value at that time. On the date of acquisition, Safe Systems showed the following balances on their ledger:
Safe Systems has determined that their buildings have a remaining life of 10 years, and their equipment has a remaining useful life of 8 years.
Requirement 1: Calculate the amount of goodwill that will appear on the general ledger of Passcode and Safe Systems, as well as the amount that will appear on the consolidated financial statements.
Requirement 2: Calculate the amount of amortization that will appear on the consolidated financial statements for buildings and equipment, and explain how this amortization of excess fair value is shown on the separate general ledgers of Passcode and Safe Systems.

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Definitions:

Promotional Budget

The allocation of funds dedicated to marketing and advertising efforts over a specific period.

High-Quality

A term used to describe products or services that meet or exceed the expectations of customers, characterized by superior performance, durability, and error-free operation.

Technical Sophistication

Technical sophistication refers to the level of advanced technological features and capabilities present in a product or system.

Complexity

The state or quality of being intricate or complicated, often referring to systems, processes, or structures with multiple interacting components.