GEN CMB ADV FINCL ACCT; Connect Access Card
11th Edition
ISBN: 9781259546648
Author: Theodore E. Christensen
Publisher: McGraw-Hill Education
expand_more
expand_more
format_list_bulleted
Question
Chapter 1, Problem 1.10E
To determine
To prepare:
Introduction: Internal expansion refers to situation in a company forms a subsidiary by transferring some of its assets and liabilities and in exchange of ownership shares. Shares of the subsidiary is either provided to the shareholders in addition to their existing shares (Spin off) or in exchange of their existing shares (split off).
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Company A has earrings per share of $3 with 20 million shares outstanding. The current market price of Company As Stock is $40 per share. Company A is in process of acquiring Company B., which has earnings per share of $1.50, 4 million of common stock shares. Currently, Company Bs stock trades at $25. The acquisition will be done 100% by stock issue by Company A. Exchange ratio will be set in a way that, at current pre-announcement share prices for both firms, the offer represents a 10% premium to buy Company B. What will be the price per share of Company A immediately after the announcement of acquisition? What will be subsequent price action in both Company As and Company Bs stocks? Explain briefly.
Bar Corporation has been looking to expand its operations and has decided to acquire the assets of Vicker Company and Kendal Company. Bar will issue 30,000 shares of its $10 par common stock to acquire the net assets of Vicker Company and will issue 15,000 shares to acquire the net assets of Kendal Company.Vicker and Kendal have the following balance sheets as of December 31, 2015:Assets Vicker KendalAccounts receivable . . . . . . . . . . . . . . . . . $ 200,000 $ 80,000Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . 150,000 85,000Property, plant, and equipment:Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150,000 50,000Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . .500,000 300,000Accumulated depreciation. . . . . . . . .. . . (150,000) (110,000)Total assets . . . . . . . . . .…
etson Co. issued 50,000 shares of P20 par value ordinary shares at P24 per share. A year after, Jetson Co. reacquired 10,000 shares of its own at P30 per share in order to avoid possible corporate takeover by outsiders. Using cost method of accounting for treasury stock, the entry to record the acquisition is
Chapter 1 Solutions
GEN CMB ADV FINCL ACCT; Connect Access Card
Ch. 1 - What types of circumstances would encourage...Ch. 1 - How would the decision to dispose of a segment of...Ch. 1 - Prob. 1.3QCh. 1 - Prob. 1.4QCh. 1 - Prob. 1.5QCh. 1 - Prob. 1.6QCh. 1 - Prob. 1.8QCh. 1 - Prob. 1.9QCh. 1 - Prob. 1.10QCh. 1 - Prob. 1.11Q
Ch. 1 - Prob. 1.12QCh. 1 - Prob. 1.13QCh. 1 - Prob. 1.14QCh. 1 - Prob. 1.15QCh. 1 - Within the measurement period following a business...Ch. 1 - Prob. 1.17QCh. 1 - Prob. 1.1CCh. 1 - Prob. 1.3CCh. 1 - Prob. 1.4CCh. 1 - Risks Associated with Acquisitions Not all...Ch. 1 - Prob. 1.8CCh. 1 - Prob. 1.1.1ECh. 1 - Prob. 1.1.2ECh. 1 - Prob. 1.1.3ECh. 1 - Multiple-Choice Questions on Complex Organizations...Ch. 1 - Prob. 1.1.5ECh. 1 - Prob. 1.2.1ECh. 1 - Prob. 1.2.2ECh. 1 - Multiple-Choice Questions on Recording Business...Ch. 1 - Prob. 1.2.4ECh. 1 - Multiple-Choice Questions on Recording Business...Ch. 1 - Multiple-Choice Questions on Reported Balances...Ch. 1 - Multiple-Choice Questions on Reported Balances...Ch. 1 - Prob. 1.3.3ECh. 1 - Prob. 1.3.4ECh. 1 - Prob. 1.4.1ECh. 1 - Prob. 1.4.2ECh. 1 - Prob. 1.4.3ECh. 1 - Prob. 1.4.4ECh. 1 - Prob. 1.4.5ECh. 1 - Prob. 1.5ECh. 1 - Prob. 1.6ECh. 1 - Prob. 1.7ECh. 1 - Prob. 1.8ECh. 1 - Prob. 1.9ECh. 1 - Prob. 1.10ECh. 1 - Prob. 1.11ECh. 1 - Goodwill Recognition Spur Corporation reported the...Ch. 1 - Acquisition Using Debentures Planter Corporation...Ch. 1 - Bargain Purchase Using the data resented in E1-13,...Ch. 1 - Prob. 1.15ECh. 1 - Prob. 1.16ECh. 1 - Prob. 1.17ECh. 1 - Prob. 1.18ECh. 1 - Prob. 1.19ECh. 1 - Prob. 1.20ECh. 1 - Prob. 1.21ECh. 1 - Prob. 1.22ECh. 1 - Prob. 1.23ECh. 1 - Prob. 1.24PCh. 1 - Prob. 1.25PCh. 1 - Prob. 1.26PCh. 1 - Prob. 1.27PCh. 1 - Prob. 1.28PCh. 1 - Prob. 1.29PCh. 1 - Prob. 1.30PCh. 1 - Prob. 1.31PCh. 1 - Prob. 1.32PCh. 1 - Prob. 1.33PCh. 1 - Prob. 1.34PCh. 1 - Prob. 1.35PCh. 1 - Business Combination Following are the balance...Ch. 1 - Prob. 1.37PCh. 1 - Prob. 1.38PCh. 1 - Prob. 1.39PCh. 1 - Prob. 1.40P
Knowledge Booster
Similar questions
- Oriole Cosmetics acquired 10% of the 191,000 shares of common stock of Martinez Fashion at a total cost of $14 per share on March 18, 2020. On June 30, Martinez declared and paid $69,200 cash dividend to all stockholders. On December 31, Martinez reported net income of $116,000 for the year. At December 31, the market price of Martinez Fashion was $15 per share.Situation 2Waterway, Inc. obtained significant influence over Seles Corporation by buying 40% of Seles’s 28,500 outstanding shares of common stock at a total cost of $9 per share on January 1, 2020. On June 15, Seles declared and paid cash dividends of $38,100 to all stockholders. On December 31, Seles reported a net income of $78,200 for the year.Prepare all necessary journal entries in 2020 for both situations. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Date Account…arrow_forwardIn July 2007, News Corporation entered into an agreement to purchase all of the outstanding shares of Dow Jones and Company for $67 per share. Immediately prior to the News Corporation bid, the shares of Dow Jones traded at $42 per share. The number of outstanding shares at the time of the announcement was 87 million. The book value of interest-bearing liabilities on the balance sheet of Dow Jones was $1.52 billion. Estimate the cost of this acquisition to the shareholders of News Corporation What value did News Corporation place on the control of Dow Jones and Company? Note: For all requirements, enter your answers in billions rounded to 2 decimal places.arrow_forwardAs a long-term investment at the beginning of the fiscal year, Florists International purchased 30% of Nursery Supplies Inc.’s 8 million shares for $56 million. The fair value and book value of the shares were the same at that time. The company realizes that this investment typically would be accounted for under the equity method, but instead chooses the fair value option. During the year, Nursery Supplies earned net income of $40 million and distributed cash dividends of $1.25 per share. At the end of the year, the fair value of the shares is $52 million. Required: 1. Would this investment be classified on Florists’ balance sheet as held-to-maturity securities, trading securities, available-for-sale securities, significant-influence investments, or other? Explain. 2. Prepare all appropriate journal entries related to the investment during 2016. 3. Indicate the effect of this investment on 2016 income before taxes.arrow_forward
- George's Equipment is planning on merging with Nelson Machinery. George's will pay Nelson's shareholders the current value of their stock in shares of George's Equipment. George's currently has 4,600 shares of stock outstanding at a market price of $31 a share. Nelson's has 1,600 shares outstanding at a price of $38 a share. What is the value per share of the merged firm?arrow_forwardChoose the correct. 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.arrow_forwardWinsor Inc. recently purchased Holiday Corp., a large midwestern home painting corporation. One of the terms of the merger was that if Holiday's income for 2020 was $110,000 or more, 10,000 additional shares would be issued to Holiday's stockholders in 2021. Holiday's income for 2019 was $120,000. Instructions a. Would the contingent shares have to be considered in Winsor's 2019 earnings per share computations? b. Assume the same facts, except that the 10,000 shares are contingent on Holiday's achieving a net income of $130,000 in 2020. Would the contingent shares have to be considered in Winsor's earnings per share computations for 2019?arrow_forward
- Eagle Exporters purchased 80,000 of the 200,000 outstanding shares of Giant Distributors for $3,000,000. Eagle has significant influence over Giant and will account for this investment using the equity method. During the year, Giant declared dividends of $100,000 and reported Net Income of $780,000. What is the balance in the Investment in Giant account at year end? Group of answer choices $2,648,000 $3,272,000 $2,728,000 $3,352,000arrow_forwardWhen 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. $5,300,000arrow_forwardOn June 30, 20x1, Cockroach Co. acquired 75,000 of Nymph Co.'s 100,000 outstanding equity shares with par value per share of ₱4 for₱16 per share. At the time of acquisition, the retained earnings of Nymph were ₱320,000. The quoted price of Nymph's shares was ₱14per share at acquisition date. QUESTION: How much is the consolidated total equity?arrow_forward
- Cisco Corporation has planned right issue of 75,000,000 Ordinary shares which has par value of PKR 10/- each.The stock of Cisco Corporation is illiquid in nature so therefore, the right issue price will be 38% discount to the current market price which is PKR 65/- per share. The proceeds from this right issue will be utilized for Balancing, Modernization and Replacement (BMR) of existing unit. A local brokerage house has been appointed as underwriter by the Company for the subject right issue. The brokerage house has approached other financial institutions for underwriting commitment in the subject right issue. Underwriting Commission will be 0.75% and Take up Commission will be 1.25%. Stack Ford Bank has given underwriting commitment of PKR 500Mn for the aforementioned right issue. Required: (a) What will be the underwriting and take up commission amount for Stack Ford Bank if right issue is 60% subscribed? (b) After 6 months of this…arrow_forwardNeed help with the following questions please. One company that the analysis indicated as potentially suitable for acquisition by Admiral isFavorite Food Systems Inc. Favorite Food Systems Inc. which was founded by John Favorite in 1994, is a WestCoast chain with current annual sales of approximately $75 million. n 2003, the company went public.(The Favorite family now controls about 57 percent of the common stock.) 1. Calculate the pre-merger earnings per share for Admiral and Favorite and the pre-merger price-to-earnings (P/E) ratio for each company (based on the stated prices per share). 2. Calculate three additional exchange ratios of Admiral shares for each share of Favorite. Assume a 15%, 20%, and 25% premium price per share over the stated Favorite price of $15 per share. 3. Calculate the Admiral Foods post-merger income statement and earnings per share, assuming an exchange ratio of 0.45.arrow_forward(TCO A) Adelman Company owns 45% of the outstanding voting common stock of Craig Corp. and has the ability to significantly influence the investee's operations. On January 3, 20X1, the balance in the Investment in Craig Corp. account was $462,000. Amortization associated with this acquisition is $10,000 per year. During 20X1, Craig earned a net income of $105,000 and paid cash dividends of $20,000. Previously in 20X0, Craig had sold inventory costing $28,000 to Adelman for $40,000. All but 20% of that inventory had been sold to outsiders by Adelman during 20X0. Additional sales were made to Adelman in 20X1 at a transfer price of $60,000 that had cost Craig $45,000. Only 10% of the 20X1 purchases had not been sold to outsiders by the end of 20X1.Required:(A) What amount of unrealized intra-entity inventory profit should be deferred by Adelman at December 31, 20X0?(B) What amount of unrealized intra-entity profit should be deferred by Adelman at December 31, 20X1?(C) What amount of…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT
Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning
Cornerstones of Cost Management (Cornerstones Ser...
Accounting
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:9781337514835
Author:MOYER
Publisher:CENGAGE LEARNING - CONSIGNMENT
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:Cengage Learning