Question

King's Road recently acquired all of Oxford Corporation's stock and is now consolidating the financial data of this new subsidiary. King's Road paid a total of $965,000 for Oxford, which has the following accounts: Fair Value Tax Basis Accounts receivable $ 170,000 $ 170,000 Inventory 151,000 151,000 Land 199,000 199,000 Buildings 201,500 147,000 Equipment 255,750 192,000 Liabilities (289,000 ) (289,000 ) What amount of deferred tax liability arises in the acquisition

Answer 1

$35,475

Step-by-step explanation:

The computation of amount of deferred tax liability is shown below:-

Fair Value Tax Basis Difference

Buildings $201,500 $147,000 $54,500

Equipment $255,750 $192,000 $63,750

$118,250

Deferred Tax Liability = × Difference of Building and equipment

= 30% × 118,250

= $35,475