Accounting for Fuzzy Dice Inc. Acquisition of Tiny Tots Toys Llc

1682 Words Nov 22nd, 2013 7 Pages
ISSUE: Accounting for Fuzzy Dice Inc. acquisition of Tiny Tots Toys LLC related to decision (1) to use purchased facility to enter another business line or (2) renovate the facility to expand the current production.

Fuzzy Dice Inc. (“Fuzzy” or “the Company”) manufactures novelty items that it distributes to wholesalers and large online and direct-mail retailers. Fuzzy operates in an area where several other light manufacturers operate, one of which is Tiny Tots Toys LLC (“Tiny”), an educational children’s toy manufacturer. Tiny has been unable to turn a profit for the past few years and has recently filed for Chapter 11 bankruptcy protection.
Tiny’s primary asset is its manufacturing facility. The
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Input. Any economic resource that creates, or has the ability to create, outputs when one or more processes are applied to it. Examples include long-lived assets (including intangible assets or rights to use long-lived assets), intellectual property, the ability to obtain access to necessary materials or rights, and employees.
b. Process. Any system, standard, protocol, convention, or rule that when applied to an input or inputs, creates or has the ability to create outputs. Examples include strategic management processes, operational processes, and resource management processes. These processes typically are documented, but an organized workforce having the necessary skills and experience following rules and conventions may provide the necessary processes that are capable of being applied to inputs to create outputs. Accounting, billing, payroll, and other administrative systems typically are not processes used to create outputs.
c. Output. The result of inputs and processes applied to those inputs that provide or have the ability to provide a return in the form of dividends, lower costs, or other economic benefits directly to investors or other owners, members, or participants.
Tiny meets the input requirements. Fuzzy will be an owner of Tiny’s manufacturing facility, small fleet of its delivery vehicles, and outdated but operational manufacturing equipment.
Fuzzy expects to hire all the current Tiny’s employees;

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