After much analysis, Company A, a non-U.S. company, is considering the acquisition of Co...

After much analysis, Company A, a non-U.S. company, is considering the acquisition of Company B. Under A’s local GAAP, two alternative methods of acquisition accounting are available to the company. It can either buy all of Company B’s stock on the market for a cash outlay of $650,000, or Company A can exchange authorized but unissued Company A shares with a value of $650,000 (currently selling for $50 per share) for all of the outstanding shares of Company B. In either case, Company A will assume Company B’s liabilities, and Company B will be preserved as a wholly owned subsidiary. The following data were collected immediately before the acquisition:

Required:

a. Present the balance sheet that would result immediately after the acquisition assuming a stock exchange is consummated and pooling accounting is to be followed.

Use only the facts given and assume no others.

b. Present the balance sheet that would result immediately after the acquisition is consummated assuming that the Company B stock is purchased for cash rather than exchanged.

Assume that of the $650,000 purchase price, Company A took out a term loan for $550,000 of the total and used $100,000 cash on hand for the remainder.