1. On 12/31, Choco acquired all assets and liabilities of Cake by issuing 40,000 shares of its common stock when the market value (=fair value) is $32/share and this combination is a statutory merger (Cake was dissolved). Choco has common stock with $15 par, 50,000 shares outstanding and Cake has $5 par, 60,000 shares outstanding
Choco Book Values | Cake Book Values |
Cake Fair Values |
|
Cash and Receivable | 350,000 | 180,000 | 170,000 |
Inventories | 250,000 | 100,000 | 150,000 |
Land | 700,000 | 120,000 | 240,000 |
Building and equipment | 600,000 | 600,000 | 900,000 |
Patented technology | 100,000 | 0 | 60,000 |
Accounts Payable | 300,000 | 120,000 | 150,000 |
Long-term debt | 0 | 400,000 | 350,000 |
Common Stock | 750,000 | 300,000 | |
Additional paid in capital | 500,000 | 60,000 | |
Retained earnings 12/31 | 450,000 | 120,000 | |
Revenues | 350,000 | 160,000 | |
Expenses | 310,000 | 130,000 |
Q1. How much is the consideration transferred?
Q2. What is the consolidated balance for Land?
Q3. What is the consolidated balance for Accounts payable?
Q4. Prepare fair value allocation and goodwill schedule at the date of the acquisition.
1.
Consideration = 40,000 X 32 = $ 1,280,000
2.
Consolidated balance of Land = 700,000 + 240,000 = $ 940,000
3.
Consolidated balance for Account Payable = 300,000 + 150,000 = $ 450,000
4.
Debit | Credit | |
Cash and Receivable | 170,000 | |
Inventories | 150,000 | |
Land | 240,000 | |
Building and equipment | 900,000 | |
Patented technology | 60,000 | |
Goodwill | 260,000 | |
Accounts Payable | 150,000 | |
Long-term debt | 350,000 | |
Shareholder of Cake | 1,280,000 |
1. On 12/31, Choco acquired all assets and liabilities of Cake by issuing 40,000 shares of...
1. On 12/31, Choco acquired all assets and liabilities of Cake by issuing 40,000 shares of its common stock when the market value (=fair value) is $32/share and this combination is a statutory merger (Cake was dissolved). Choco has common stock with $15 par, 50,000 shares outstanding and Cake has $5 par, 60,000 shares outstanding Choco Book Values Cake Book Values Cake Fair Values Cash and Receivable 350,000 180,000 170,000 Inventories 250,000 100,000 150,000 Land 700,000 120,000 240,000 Building and...
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