Concept explainers
a.
Introduction: Acquisition of Net Assets is a process in which the acquiring company acquires all the assets and liabilities of the acquired company in exchange for consideration. In this process, the acquiring company records all identifiable assets and liabilities at fair values and any excess of the consideration paid over fair value is recognized as
To compute:The amount of common stock reported immediately following the business combination.
a.
Explanation of Solution
Calculate the amount of common stock reported immediately following the business combination:
| Particulars | Amount ($) |
| Existing Common Stock | 200,000 |
| Add: Common Stock issued in exchange for net assets | |
| Total common stock to be reported | 280,000 |
Table (1)
b.
Introduction: Acquisition of Net Assets is a process in which the acquiring company acquires all the assets and liabilities of the acquired company in exchange for consideration. In this process, the acquiring company records all identifiable assets and liabilities at fair values and any excess of the consideration paid over fair value is recognized as goodwill.
To compute: The amount of cash and receivables reported immediately following the business combination.
b.
Explanation of Solution
Calculate the amount of cash and receivables reported immediately following the business combination:
| Particulars | Amount ($) |
| Existing Cash and Receivables | 150,000 |
| Add: Fair value of Cash and Receivables acquired | 40,000 |
| Total Cash and Receivables reported | 190,000 |
Table (2)
c.
Introduction: Acquisition of Net Assets is a process in which the acquiring company acquires all the assets and liabilities of the acquired company in exchange for consideration. In this process, the acquiring company records all identifiable assets and liabilities at fair values and any excess of the consideration paid over fair value is recognized as goodwill.
To compute: The amount of land reported immediately following the business combination.
c.
Explanation of Solution
Compute the amount of land reported immediately following the business combination:
| Particulars | Amount ($) |
| Existing Land | 100,000 |
| Add: Fair value of Land acquired | 85,000 |
| Total Land reported | 185,000 |
Table (3)
d.
Introduction: Acquisition of Net Assets is a process in which the acquiring company acquires all the assets and liabilities of the acquired company in exchange for consideration. In this process, the acquiring company records all identifiable assets and liabilities at fair values and any excess of the consideration paid over fair value is recognized as goodwill.
To compute: The amount of building and equipment reported immediately following the business combination.
d.
Explanation of Solution
Compute the amount of building and equipment reported immediately following the business combination:
| Particulars | Amount ($) |
| Existing Building and Equipment | 300,000 |
| Add: Fair value of Building and Equipment acquired | 230,000 |
| Total Building and Equipment reported | 530,000 |
Table (4)
e.
Introduction: Acquisition of Net Assets is a process in which the acquiring company acquires all the assets and liabilities of the acquired company in exchange for consideration. In this process, the acquiring company records all identifiable assets and liabilities at fair values and any excess of the consideration paid over fair value is recognized as goodwill.
To compute: The amount of goodwill reported immediately following the business combination.
e.
Explanation of Solution
Compute the amount of goodwill reported immediately following the business combination:
| Particulars | Amount ($) |
| Consideration | |
| Less: Fair value net assets acquired | 355,000 |
| Goodwill | 45,000 |
Table (5)
f.
To compute: The amount of additional paid-in capital reported immediately following the business combination.
Introduction:Acquisition of Net Assets is a process in which the acquiring company acquires all the assets and liabilities of the acquired company in exchange for consideration. In this process, the acquiring company records all identifiable assets and liabilities at fair values and any excess of the consideration paid over fair value is recognized as goodwill.
f.
Explanation of Solution
Calculate the amount of additional paid-in capital reported immediately following the business combination:
| Particulars | Amount ($) |
| Fair value net assets acquired | 355,000 |
| Add: Goodwill | 45,000 |
| Total Consideration | 400,000 |
| Less: Common Stock issued | 80,000 |
| Additional Paid-in Capital raised | 320,000 |
| Add: Existing Paid-in Capital | 20,000 |
| Total Additional Paid-in Capital Reported | 340,000 |
Table (6)
g.
To compute: The amount of
Introduction:Acquisition of Net Assets is a process in which the acquiring company acquires all the assets and liabilities of the acquired company in exchange for consideration. In this process, the acquiring company records all identifiable assets and liabilities at fair values and any excess of the consideration paid over fair value is recognized as goodwill.
g.
Explanation of Solution
The amount of retained earnings would continue to be at its existing level of $330,000 immediately following the business combination.
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Chapter 1 Solutions
EBK ADVANCED FINANCIAL ACCOUNTING
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Financial Reporting, Financial Statement Analysis...FinanceISBN:9781285190907Author:James M. Wahlen, Stephen P. Baginski, Mark BradshawPublisher:Cengage Learning