Problem

Incomplete Data Following PurchaseOn January 1, 20X1, Alpha Corporation acquired all of Br...

Incomplete Data Following Purchase

On January 1, 20X1, Alpha Corporation acquired all of Bravo Company’s assets and liabilities by issuing shares of its S3 par value stock to the owners of Bravo Company in a business combination. Alpha also made a cash payment to Banker Corporation for stock issue costs. Partial balance sheet data for Alpha and Bravo, before the cash payment and issuance of shares, and a combined balance sheet following the business combination are as follows:

 

 Alpha

Corporation

Bravo

Company

 

 

Book Value

Book Value

Fair Value

Combined Entity

Cash

$ 65,000

$ 15,000

$ 15,000

$ 56,000

Accounts Receivable

105,000

30,000

30,000

135,000

Inventory

210,000

90,000

?

320,000

Buildings and Equipment (net)

400,000

210,000

293,000

693,000

Goodwill

_______

__________

__________

?

Total Assets

$780,000

$345,000

$448,000

$ ?

Accounts Payable

$ 56,000

$ 22,000

$ 22,000

$ 78,000

Bonds Payable

200,000

120,000

120,000

320,000

Common Stock

96,000

70,000

 

117,000

Additional Paid-In Capital

234,000

42,000

 

553,000

Retained Earnings

194,000

91,000

_______

?

Total Liabilities and Equities

$780,000

$345,000

$142,000

$ ?

Required

a. What number of its $5 par value shares did Bravo have outstanding at January 1, 20X1?


b. Assuming that all ofBravo’s shares were issued when the company was started, what was the price per share received at the time of issue?


c. How many shares of Alpha were issued at the date of combination?


d. What amount of cash did Alpha pay as stock issue costs?


e. What was the market value of Alpha’s shares issued at the date of combination?


f. What was the fair value of Bravo’s inventory at the date of combination?


g. What was the fair value of Bravo’s net assets at the date of combination?


h. What amount of goodwill, if any, will be reported in the combined balance sheet following the combination?

Step-by-Step Solution

Request Professional Solution

Request Solution!

We need at least 10 more requests to produce the solution.

0 / 10 have requested this problem solution

The more requests, the faster the answer.

Request! (Login Required)


All students who have requested the solution will be notified once they are available.
Add your Solution
Textbook Solutions and Answers Search