Asset acquisition vs. stock acquisition (fair value is different from book value)The following financial statement information is for an investor company and an investee company on January 1, 2013. On January 1, 2013, the investor company's common stock had a traded market value of $17.5 per share, and theinvestee company's common stock had a traded market value of $15.5 per share.Book ValuesFair ValuesInvestor Investee Investor InvesteeReceivables & inventories $50,000 $25,000 $45,000 $22,500100.000 50,000 150,000 75.000112,500 50,000 125,000 65,00075.000 40,000$262,500 $125,000 $395,000 $202,500$75,000 $40,000 $90,000 $47,50010.000 5,000140,00075,00037.5005,000$262,500 $125,000$187,500 $85,000 $305,000 $155,000LandProperty & equipmentTrademarks & patentsTotal assetsLiabilitiesCommon stock ($1 par)Additional paid-in capitalRetained earningsTotal liabilities & equityNet assetsRequired (Parts a. and b. are independent of each other.) a. Assume that the investor company issued 9,500 new shares of the investor company's common stock in exchange for all of the individually identifiable assets and liabilities of the investee company. The financial information presented,above, was prepared immediately before this transaction. Provide the Investor Company's balances (i.e., on the investor's books, before consolidation) for the following accounts immediately following the acquisition of the investee's netassets:Receivables & Inventories $LandProperty & EquipmentTrademarks & PatentsInvestment in InvesteeGoodwillTotal Assets$$LiabilitiesCommon Stock ($1 par)Additional Paid-In CapitalRetained EarningsTotal Liabilities and Equity $LandProperty & EquipmentTrademarks & PatentsInvestment in InvesteeGoodwillTotal AssetsLiabilitiesCommon Stock ($1 par)Additional Paid-In CapitalRetained EarningsTotal Liabilities and Equity $$72,500175,000b. Assume that the investor company issued 9,500 new shares of the investor company's common stock in exchange for all of the investee company's common stock. The financial information presented, above, was prepared immediatelybefore this transaction. Provide the Investor Company's balances (i.e., on the investor's books, before consolidation) for the following accounts immediately following the acquisition of the investee's net assets:Receivables & Inventories $$000000000000000000000

A balance sheet is an accounting report that shows a corporation's assets liabilities, and…

bove, was prepared immediately before this transaction. Provide the Investor Company's balances (i.e., on the investor's books, before consolidation) for the following accounts immediately following the acquisition of the investee's ssets: Receivables & Inventories $ 72.500 175,000 and "roperty & Equipment Trademarks & Patents vestment in Investee Soodwill otal Assets iabilities Common Stock ($1 par) additional Paid-In Capital tetained Earnings otal Liabilities and Equity $ and Property & Equipment rademarks & Patents vestment in Investee Goodwill otal Assets $ iabilities Common Stock ($1 par) dditional Paid-In Capital tetained Earnings S 0 $ $ 0 0 0 0 0 Assume that the investor company issued 9,500 new shares of the investor company's common stock in exchange for all of the investee company's common stock. The financial information presented, above, was prepared immed efore this transaction. Provide the Investor Company's balances (i.e., on the investor's books, before consolidation) for the following accounts immediately following the acquisition of the investee's net assets: Receivables & Inventories $ 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

bove, was prepared immediately before this transaction. Provide the Investor Company's balances (i.e., on the investor's books, before consolidation) for the following accounts immediately following the acquisition of the investee's ssets: Receivables & Inventories $ 72.500 175,000 and "roperty & Equipment Trademarks & Patents vestment in Investee Soodwill otal Assets iabilities Common Stock ($1 par) additional Paid-In Capital tetained Earnings otal Liabilities and Equity $ and Property & Equipment rademarks & Patents vestment in Investee Goodwill otal Assets $ iabilities Common Stock ($1 par) dditional Paid-In Capital tetained Earnings S 0 $ $ 0 0 0 0 0 Assume that the investor company issued 9,500 new shares of the investor company's common stock in exchange for all of the investee company's common stock. The financial information presented, above, was prepared immed efore this transaction. Provide the Investor Company's balances (i.e., on the investor's books, before consolidation) for the following accounts immediately following the acquisition of the investee's net assets: Receivables & Inventories $ 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Financial Accounting

14th Edition

ISBN:9781305088436

Author:Carl Warren, Jim Reeve, Jonathan Duchac

Publisher:Carl Warren, Jim Reeve, Jonathan Duchac

Chapter15: Investments And Fair Value Accounting

Section: Chapter Questions

Problem 15E

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