Exercise 2-2
The balance sheets of Petrello Company and Sanchez Company as of January 1, 2014, are presented below. On that date, after an extended period of negotiation, the two companies agreed to merge. To effect the merger, Petrello Company is to exchange its unissued common stock for all the outstanding shares of Sanchez Company in the ratio of 1/2 share of Petrello for each share of Sanchez. Market values of the shares were agreed on as Petrello, $50; Sanchez, $25. The fair values of Sanchez Company’s assets and liabilities are equal to their book values with the exception of plant and equipment, which has an estimated fair value of $756,220.
| Petrello | Sanchez | |||
| Cash | $446,200 | $184,800 | ||
| Receivables | 512,850 | 218,560 | ||
| Inventories | 1,997,500 | 250,670 | ||
| Plant and equipment (net) | 4,026,110 | 834,500 | ||
| Total assets | $6,982,660 | $1,488,530 | ||
| Current Liabilities | $1,229,500 | $292,050 | ||
| Common stock ($16 par value) | 3,396,700 | 800,000 | ||
| Other contributed capital | 439,600 | —0— | ||
| Retained earnings | 1,916,860 | 396,480 | ||
| Total equities | $6,982,660 | $1,488,530 |
Prepare a balance sheet for Petrello Company immediately after the
merger. (List assets in order of liquidity.)
Homework Answers
|
Balance sheet of Petrello Company immediately after the merger |
|
|
Assets Cash [446,200+184,800] Receivables [512,850+218,560] Inventories [1,997,500+250,670] Plant and Equipment (net) [4,026,110+756,220] Goodwill (on acquisition) |
$631,000 $731,410 $2,248,170 $4,782,330 $131,800 |
|
Total asset |
$8,524,710 |
|
Liabilities and equity Liabilities [1,229,500+292,050] common stock (par value $16) [3,396,700+400,000] contributed capital [439,600+850,000] Retained earnings |
$1,521,550 $3,796,700 $1,289,600 $1,916,860 |
|
Total liabilities and equity |
$8,524,710 |
|
Calculation of Goodwill |
||||||||||||
|
Value paid for acquisition (800000/16*1/2*50) |
$ 1,250,000 |
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|
Net worth of Sanchez Co. |
$ 1,118,200 |
|||||||||||
|
(184,800 + 218,560 + 250,670 + 756,220 )- 292,050 |
||||||||||||
|
Goodwill on acquisition |
$ 131,800 |
|||||||||||
|
Add Answer to:
Exercise 2-2
The balance sheets of Petrello Company and Sanchez Company as of
January 1, 2014,...
EXERCISE 2‐2 Acquisition Method LO 6 The balance sheets of Petrello Company and Sanchez Company as...
EXERCISE 2‐2 Acquisition Method LO 6 The balance sheets of Petrello Company and Sanchez Company as of January 1, 2019, are presented below. On that date, after an extended period of negotiation, the two companies agreed to merge. To effect the merger, Petrello Company is to exchange its unissued common stock for all the outstanding shares of Sanchez Company in the ratio of 1/212 share of Petrello for each share of Sanchez. Market values of the shares were agreed on...
67 EXERCISE 2-2 Acquisition Method LO 6 The balance sheets of Petrello Company and Sanchez Company...
67 EXERCISE 2-2 Acquisition Method LO 6 The balance sheets of Petrello Company and Sanchez Company as of January 1, 2019, are pre- sented below. On that date, after an extended period of negotiation, the two companies agreed to merge. To effect the merger, Petrello Company is to exchange its unissued common stock for all the outstanding shares of Sanchez Company in the ratio of y, share of Petrello for each share of San- chez. Market values of the shares...
Condensed balance sheets for Phillips Company and Solina Company on January 1, 2013, are as follows:...
Condensed balance sheets for Phillips Company and Solina Company on January 1, 2013, are as follows: Phillips Solina Current assets$180,000$85,000 Plant and equipment (net)450,000140,000 Total assets$630,000$225,000 Total liabilities$95,000$35,000 Common stock, $10 par value350,000160,000 Other contributed capital125,00053,000 Retained earnings (deficit)60,000(23,000) Total liabilities and equities$630,000$225,000 On January 1, 2013, the stockholders of Phillips and Solina agreed to a consolidation. Because FASBrequires that one party be recognized as the acquirer and the other as the acquiree, it was agreed that Phillips wasacquiring Solina....
2-1 Condensed balance sheets for Phillips Company and Solina Company on January 1, 2013, are as...
2-1
Condensed balance sheets for Phillips Company and Solina Company
on January 1, 2013, are as follows:
Phillips
Solina
Current assets
$171,610
$81,840
Plant and equipment
(net)
441,500
144,220
Total assets
$613,110
$226,060
Total liabilities
$98,070
$35,990
Common stock, $10 par
value
327,300
167,910
Other contributed
capital
116,550
50,110
Retained earnings
(deficit)
71,190
(27,950
)
Total liabilities and
equities
$613,110
$226,060
On January 1, 2013, the stockholders of Phillips and Solina agreed
to a consolidation. Because FASB requires that one...
Condensed balance sheets for Smith and Jones on January 1, 2019 are as follows: Current Assets...
Condensed balance sheets for Smith and Jones on January 1, 2019 are as follows: Current Assets Plant and Equipment, Net Total Assets Smith $180,000 450,000 $630,000 Jones $85,000 140,000 $225,000 Total Liabilities Common Stock, $10 par value Other Contributed Capital Retained Earnings (deficit) Total Liabilities and Equities $95,000 350,000 125,000 60,000 $630,000 $35,000 160,000 53,000 -23,000 $225,000 On January 1, 2019, Smith and Jones agreed to a consolidation. Because the FASB requires one party to be the buyer or acquiring...
Prepare a consolidated balance sheet at the date of acquisition. Exercise 3-3 On January 2, 2014,...
Prepare a consolidated balance sheet at the date of
acquisition.
Exercise 3-3 On January 2, 2014, Prunce Company acquired 90% of the outstanding common stock of Sun Company for $195,030 cash. Just before the acquisition, the balance sheets of the two companies were as follows: Cash Accounts receivable (net) Inventory Plant and equipment (net) Land Prunce $274,030 156,030 106,590 373,640 59,480 $969,770 Sun $ 69,110 22,840 57,530 92,380 32,530 $274,390 Total asset Accounts payable Mortgage payable Common stock, $2 par...
Bilge Pumpworks and Seaworthy Rope Company agreed to merge on January 1, 20X3. On the date...
Bilge Pumpworks and Seaworthy Rope Company agreed to merge on January 1, 20X3. On the date of the merger agreement, the companies reported the following data: Bilge Pumpworks Seaworthy Rope Company Fair Value Fair Value Balance Sheet Items Assets Cash & Receivables Inventory Land lant & Equipment Less: Accumulated Depreciation Book Value Book Value $ 98,000 108,000 108,000 416,000 (140,000) $98,000 160,000 152,000 318,000 $ 17000 27,000 7,000 213,000 (79,000) $ 17000 39,000 12,000 130,000 Total Assets S590,000 $728,000 185,000...
Exercise 3-3 On January 2, 2014, Prunce Company acquired 90% of the outstanding common stock of...
Exercise 3-3
On January 2, 2014, Prunce Company acquired 90% of the outstanding
common stock of Sun Company for $180,700 cash. Just before the
acquisition, the balance sheets of the two companies were as
follows:
Prunce
Sun
Cash
$282,130
$ 59,040
Accounts receivable (net)
142,020
24,810
Inventory
118,670
53,230
Plant and equipment (net)
395,640
92,960
Land
62,550
29,220
Total asset
$1,001,010
$259,260
Accounts payable
$106,440
$ 50,420
Mortgage payable
67,320
37,660
Common stock, $2 par value
421,400
76,960
Other contributed...
Required information [The following information applies to the questions displayed below.) Pumpworks Inc. and Seaworthy Rope...
Required information [The following information applies to the questions displayed below.) Pumpworks Inc. and Seaworthy Rope Company agreed to merge on January 1, 20X3. On the date of the merger agreement, the companies reported the following data: Pumpworks Book Value Fair Value Seaworthy Rope Company Book Value Fair Value $ 101,000 101,000 101,000 410,000 (141,000) $ 572,000 $191,000 156,000 146,000 310,000 $ 15,000 25,000 5,000 218,000 (62.000 $ 201,000 $ 15,000 37,000 10,000 pict 128,000 ure $190,000 Balance Sheet Items...
Pool Company purchased 90% of the outstanding common stock of Spruce Company on December 31, 2014,...
Pool Company purchased 90% of the outstanding common stock of Spruce Company on December 31, 2014, for cash. At that time the balance sheet of Spruce Company was as follows: Current assets $1,135,400 Plant and equipment 1,069,190 Land 175,250 Total assets $2,379,840 Liabilities $830,150 Common stock, $20 par value 825,300 Other contributed capital 441,330 Retained earnings 377,560 Total 2,474,340 Less treasury stock at cost, 4,725 shares 94,500 Total equities $2,379,840 Prepare the elimination entry required for the preparation of a...
67 EXERCISE 2-2 Acquisition Method LO 6 The balance sheets of Petrello Company and Sanchez Company as of January 1, 2019, are pre- sented below. On that date, after an extended period of negotiation, the two companies agreed to merge. To effect the merger, Petrello Company is to exchange its unissued common stock for all the outstanding shares of Sanchez Company in the ratio of y, share of Petrello for each share of San- chez. Market values of the shares...
2-1
Condensed balance sheets for Phillips Company and Solina Company
on January 1, 2013, are as follows:
Phillips
Solina
Current assets
$171,610
$81,840
Plant and equipment
(net)
441,500
144,220
Total assets
$613,110
$226,060
Total liabilities
$98,070
$35,990
Common stock, $10 par
value
327,300
167,910
Other contributed
capital
116,550
50,110
Retained earnings
(deficit)
71,190
(27,950
)
Total liabilities and
equities
$613,110
$226,060
On January 1, 2013, the stockholders of Phillips and Solina agreed
to a consolidation. Because FASB requires that one...
Condensed balance sheets for Smith and Jones on January 1, 2019 are as follows: Current Assets Plant and Equipment, Net Total Assets Smith $180,000 450,000 $630,000 Jones $85,000 140,000 $225,000 Total Liabilities Common Stock, $10 par value Other Contributed Capital Retained Earnings (deficit) Total Liabilities and Equities $95,000 350,000 125,000 60,000 $630,000 $35,000 160,000 53,000 -23,000 $225,000 On January 1, 2019, Smith and Jones agreed to a consolidation. Because the FASB requires one party to be the buyer or acquiring...
Prepare a consolidated balance sheet at the date of
acquisition.
Exercise 3-3 On January 2, 2014, Prunce Company acquired 90% of the outstanding common stock of Sun Company for $195,030 cash. Just before the acquisition, the balance sheets of the two companies were as follows: Cash Accounts receivable (net) Inventory Plant and equipment (net) Land Prunce $274,030 156,030 106,590 373,640 59,480 $969,770 Sun $ 69,110 22,840 57,530 92,380 32,530 $274,390 Total asset Accounts payable Mortgage payable Common stock, $2 par...
Bilge Pumpworks and Seaworthy Rope Company agreed to merge on January 1, 20X3. On the date of the merger agreement, the companies reported the following data: Bilge Pumpworks Seaworthy Rope Company Fair Value Fair Value Balance Sheet Items Assets Cash & Receivables Inventory Land lant & Equipment Less: Accumulated Depreciation Book Value Book Value $ 98,000 108,000 108,000 416,000 (140,000) $98,000 160,000 152,000 318,000 $ 17000 27,000 7,000 213,000 (79,000) $ 17000 39,000 12,000 130,000 Total Assets S590,000 $728,000 185,000...
Exercise 3-3
On January 2, 2014, Prunce Company acquired 90% of the outstanding
common stock of Sun Company for $180,700 cash. Just before the
acquisition, the balance sheets of the two companies were as
follows:
Prunce
Sun
Cash
$282,130
$ 59,040
Accounts receivable (net)
142,020
24,810
Inventory
118,670
53,230
Plant and equipment (net)
395,640
92,960
Land
62,550
29,220
Total asset
$1,001,010
$259,260
Accounts payable
$106,440
$ 50,420
Mortgage payable
67,320
37,660
Common stock, $2 par value
421,400
76,960
Other contributed...
Required information [The following information applies to the questions displayed below.) Pumpworks Inc. and Seaworthy Rope Company agreed to merge on January 1, 20X3. On the date of the merger agreement, the companies reported the following data: Pumpworks Book Value Fair Value Seaworthy Rope Company Book Value Fair Value $ 101,000 101,000 101,000 410,000 (141,000) $ 572,000 $191,000 156,000 146,000 310,000 $ 15,000 25,000 5,000 218,000 (62.000 $ 201,000 $ 15,000 37,000 10,000 pict 128,000 ure $190,000 Balance Sheet Items...
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