Jones Company obtains all of the common stock of Hudson, Inc., by issuing 50,000 shares of its own stock. Under these circumstances, why might the determination of a fair value for the consideration be difficult?
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Jones Company obtains all of the common stock of Hudson, Inc., by issuing 50,000 shares of its own stock. Under these circumstances, why might the determination of a fair value for the consideration be difficult?
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- Jones Company obtains all of the common stock of Hudson, Inc., by issuing 50,000 shares of its own stock. Under these circumstances, why might the determination of a fair value for the consideration transferred be difficult?Hamilton Boats issued 175,000 shares of its no-par common stock to Sudoku Motors in exchange for 1,000 four-stroke outboard motors that normally sell in quantity for $3,500 each. By what amount should Hamilton’s shareholders’ equity increase as a result of this transaction?Williams Industries has outstanding 30 million common shares, 20 million Class A shares, and 20 million Class B shares. Williams has the right but not the obligation to repurchase the Class A shares if a change in ownership of the voting common shares causes J. P. Williams, founder and CEO, to have less than 50% ownership. Williams has the unconditional obligation to repurchase the Class B shares upon the death of J. P. Williams.Required:Which, if any, of the shares should be reported in Williams’s balance sheet as liabilities? Explain.
- Williams Industries has outstanding 30 million common shares, 20 million Class A shares, and 20 million Class B shares. Williams has the right but not the obligation to repurchase the Class A shares if a change in ownership of the voting common shares causes J. P. Williams, founder and CEO, to have less than 50% ownership. Williams has the unconditional obligation to repurchase the Class B shares upon the death of J. P. Williams. Required: Which, if any, of the shares should be reported in Williams’ balance sheet as liabilities? Explain.Arcola, Inc., acquires all 40,000 shares of Tuscola Company for $725,000. A year later, when Arcola’s equity adjusted balance in its investment in Tuscola equals $800,000, Tuscola issues an additional 10,000 shares to outside investors for $25 per share. Which of the following best describes the effect of Tuscola’s stock issue on Arcola’s investment account?a. No effect because the shares were all sold to outside parties.b. The investment account is reduced because Arcola now owns a smaller percentage of Tuscola.c. The investment account is increased because Arcola’s share of Tuscola’s value has increased.d. No effect because Arcola maintains control over Tuscola despite the new stock issue.On December 31, Phoenix Corporation acquired all of Sedona Corporation’s voting stock in exchange for $560,000 cash. At the acquisition date, the fair values of Sedona’s assets and liabilities equaled their carrying values, except that the fair value of the inventory was $20,000 lower than the carrying value, the fair value of the equipment was $50,000 higher than the carrying value, and the fair value of the long-term debt was $4,000 lower than the carrying value. The separate condensed balance sheets of the two companies immediately after the acquisition (on 12/31) are as follows: Phoenix Sedona Cash $ 90,000 $ 60,000 Accounts receivable 130,000 25,000 Inventory 160,000 70,000 Plant and equipment (net)…
- When it purchased Sutton, Inc. on January 1, 20X1, Pavin Corporation issued 500,000 shares of its $5 par voting common stock. On that date the fair value of those shares totaled $4,200,000. Related to the acquisition, Pavin had payments to the attorneys and accountants of $200,000, and stock issuance fees of $100,000. Immediately prior to the purchase, the equity sections of the two firms appeared as follows: Pavin Sutton Common stock $ 4,000,000 $ 700,000 Paid-in capital in excess of par 7,500,000 900,000 Retained earnings 5,500,000 500,000 Total $17,000,000 $2,100,000 Immediately after the purchase, the consolidated balance sheet should report retained earnings of: a. $6,000,000 b. $5,800,000 c. $5,500,000 d. $5,300,000On January 1, Paisley, Inc., paid $560,000 for all of Skyler Corporation’s outstanding stock. This cash payment was based on a price of $180 per share for Skyler’s $100 par value preferred stock and $38 per share for its $20 par value common stock. The preferred shares are voting, cumulative, and fully participating. At the acquisition date, the book values of Skyler’s accounts equaled their fair values. Any excess fair value is assigned to an intangible asset and will be amortized over a 10-year period. During the year, Skyler sold inventory costing $60,000 to Paisley for $90,000. All but $18,000 (measured at transfer price) of this merchandise has been resold to outsiders by the end of the year. At the end of the year, Paisley continues to owe Skyler for the last shipment of inventory priced at $28,000. Also, on January 2 Paisley sold Skyler equipment for $20,000 although it had a carrying amount of only $12,000 (original cost of $30,000). Both companies depreciate such property…On January 1, 2019, ABC Inc., paid P700,000 for 10,000 shares of XYZ’s Company’s voting ordinary shares, which was a 10% interest in XYZ. At that date the net assets of XYZ totaled P6,000,000. The fair values of all of XYZ’s identifiable assets and liabilities were equal to their book values. ABC does not have the ability to exercise significant influence over the operating and financial policies of XYZ. ABC received dividends of P0.90 per share from XYZ on October 1, 2019. XYZ reported net income of P400,000 for the year ended December 31, 2019. On July 1, 2020, ABC paid P2,400,000 for 30,000 additional shares of XYZ Company’s voting ordinary shares, which represents a 30% investment in XYZ.. The fair values of XYZ’s identifiable assets net of liabilities were equal to their book values of P6,500,000. As a result of this transaction, ABC has the ability to exercise significant influence over the operating and financial policies of XYZ. ABC received dividends of P1.10 per share from…
- On June 30, 2020, Pearl Co. acquired 80% of the outstanding shares of Scott Co. for P3,125,000. Onthis date Pearl Co.’s net assets had book value of P5,000,000 but with a fair value of P4,062,500. Theliabilities of Scott Co have a book and fair value of P250,000. Pearl Co. paid P62,500 to a CPA Lawyer who facilitated the combination. The fair value of the non-controlling interest on this date was P750,000. Compute the goodwill (gain from bargain price) arising from the above combinationa. P62,500b. P75,000c. P(62,500)d. P(125,000)Peter Corp acquired the net identifiable assets of Simon Corp by issuing its own 5,000 ordinary shares with par and fair value of P100 and P125 per share, respectively and payment of cash of P2,000,000. The assets and liabilities of Simon have fair values of P3,500,000 and P1,200,000, respectively. Peter Corp incurred the following other related cost of acquiring Simon Corp. such as cost of registering shares P120,000 including listing fees of P20,000; due diligence cost of P5,000; legal fees P10,000; broker’s fee P3,000; Audit fee for SEC registration of share issue P25,000; printing cost of share certificates P2,000; pre acquisition audit fee P8,000; and general and administrative cost of maintaining an internal acquisition P30,000. The total goodwill to be recorded by Peter Corp?Peter Corp acquired the net identifiable assets of Simon Corp by issuing its own 5,000 ordinary shares with par and fair value of P100 and P125 per share, respectively and payment of cash of P2,000,000. The assets and liabilities of Simon have fair values of P3,500,000 and P1,200,000, respectively. Peter Corp incurred the following other related cost of acquiring Simon Corp. such as cost of registering shares P120,000 including listing fees of P20,000; due diligence cost of P5,000; legal fees P10,000; broker’s fee P3,000; Audit fee for SEC registration of share issue P25,000; printing cost of share certificates P2,000; pre acquisition audit fee P8,000; and general and administrative cost of maintaining an internal acquisition P30,000. The total expenditures that should be debited to share premium?