Advanced Accounting
12th Edition
ISBN: 9781305084858
Author: Paul M. Fischer, William J. Tayler, Rita H. Cheng
Publisher: Cengage Learning
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Chapter 2, Problem 2.1.1C
To determine
Business combination:
Business combination refers to the combining of one or more business organizations in a single entity. The business combination leads to the formation of combined financial statements. After business combination, the entities having separate control merges into one having control over all the assets and liabilities. Merging and acquisition are types of business combinations.
Fair value of the asset:
Fair value of the asset is the amount at which two parties may enter into an agreement with open hand.
:
Whether the asked price seem to be a real bargain or not. Also, decide whether the price is reasonable for an interest of 60% after considering the entire equity of
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Chapter 2: Partnerships
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Your client, Great Value Hardware Stores, has come to you for assistance in evaluating an opportunity to purchase a controlling interest in a hardware store in a neighboring city. The store under consideration is a closely held family corporation. Owners of 60% of the shares are willing to sell you the 60% interest, 30,000 common stock shares in exchange for 7,500 of Great Value shares, which have a fair value of $40 each and a par value of $10 each.Your client sees this as a good opportunity to enter a new market. The controller of Great Value knows, however, that all is not well with the store being considered. The store, Al’s Hardware, has not kept pace with the market and has been losing money. It also has a major lawsuit against it stemming from alleged faulty electrical components it supplied that caused a fire. The store is not insured for the loss. Legal counsel advises that the store will likely pay $300,000 in damages.The following balance sheet was provided by Al’s Hardware…
Curtis’s Coffee
Cookie Creations
Cash
$7,130
$12,000
Accounts receivable
100
800
Inventory
450
1,200
Equipment
2,500
1,000*
Combining forces will also allow Natalie and Curtis to pool their resources and buy a few more assets to run their new business venture.
Curtis and Natalie then meet with a lawyer and form a corporation on November 1, 2020, called Cookie & Coffee Creations Inc. The articles of incorporation state that there will be two classes of shares that the corporation is authorized to issue: common shares and preferred shares. They authorize 100,000 no-par shares of common stock and 10,000 no-par shares of preferred stock with a $0.50 noncumulative dividend.
The assets held by each of their sole proprietorships will be transferred into the corporation at current market value. Curtis will receive 10,180 common shares, and Natalie will receive 15,000 common shares in the corporation. Therefore, the shares have a fair value of $1 per share.
In a…
Chapter 2 Solutions
Advanced Accounting
Ch. 2 - Prob. 1UTICh. 2 - Prob. 2UTICh. 2 - Prob. 3UTICh. 2 - Prob. 4UTICh. 2 - Prob. 5UTICh. 2 - Prob. 6UTICh. 2 - Santos Corporation is considering investing in...Ch. 2 - Prob. 2.1ECh. 2 - Prob. 2.2ECh. 2 - Prob. 3.1E
Ch. 2 - Prob. 3.2ECh. 2 - Prob. 4.1ECh. 2 - Prob. 4.2ECh. 2 - Prob. 4.3ECh. 2 - Prob. 5.1ECh. 2 - Prob. 5.2ECh. 2 - Prob. 6.1ECh. 2 - Prob. 6.2ECh. 2 - Prob. 7.1ECh. 2 - Prob. 7.2ECh. 2 - Prob. 8.1ECh. 2 - Prob. 9.1ECh. 2 - Prob. 9.2ECh. 2 - Prob. 9.4ECh. 2 - Prob. 2A.1AECh. 2 - Prob. 2.1.1PCh. 2 - Prob. 2.1.2PCh. 2 - Prob. 2.2.1PCh. 2 - Prob. 2.2.2PCh. 2 - Prob. 2.2.3PCh. 2 - Prob. 2.3.1PCh. 2 - Prob. 2.3.2PCh. 2 - Prob. 2.3.3PCh. 2 - Prob. 2.4.1PCh. 2 - Prob. 2.4.2PCh. 2 - Prob. 2.4.3PCh. 2 - Prob. 2.5.1PCh. 2 - Prob. 2.5.2PCh. 2 - Prob. 2.5.3PCh. 2 - Prob. 2.6.1PCh. 2 - Prob. 2.6.2PCh. 2 - Prob. 2.7.1PCh. 2 - Prob. 2.7.2PCh. 2 - Prob. 2.8.1PCh. 2 - Prob. 2.8.2PCh. 2 - Prob. 2.9.1PCh. 2 - Prob. 2.9.2PCh. 2 - Prob. 2.10.1PCh. 2 - Prob. 2.11.1PCh. 2 - Prob. 2.12.1PCh. 2 - Prob. 2.12.2PCh. 2 - Prob. 2.13.1PCh. 2 - Prob. 2.13.2PCh. 2 - Prob. 2.14.1PCh. 2 - Prob. 2.14.2PCh. 2 - Prob. 2.15.1PCh. 2 - Prob. 2.15.2PCh. 2 - Prob. 2A.1.1APCh. 2 - Prob. 2A.1.2APCh. 2 - Prob. 2.1.1CCh. 2 - Prob. 2.1.2C
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