The number of shares issue to acquire Company B. 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).

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Answer 1

Question

Chapter 1, Problem 1.39P

a.

To determine

To compute: The number of shares issue to acquire Company B.

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).

a.

Expert Solution

Explanation of Solution

Computation of number of shares issued by Company B:

Particulars	Amount($)
Common stock of Company B	70,000
Price of issue	5
Number of shares issued	14,000

Table (1)

b.

To determine

To compute: The price per share at the time of issue by Company B.

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).

b.

Expert Solution

Explanation of Solution

Computation of price per share at the time of issue by Company E:

Particulars	Amount($)
Total value of common stock combined entity ($70,000+$42,000)	112,000
Number of shares issued	14,000
Price of issue	8.00

Table (2)

c.

To determine

To compute: The number of shares issued at the date of combination.

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).

c.

Expert Solution

Explanation of Solution

Computation of number of shares issued at the date of combination:

Particulars	Amount($)
Common stock value ($117,00−$96,000)	21,000
Price of issue	3
Number of shares issued	7,000

Table (3)

d.

To determine

To compute: The amount of cash paid as stock issue costs.

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).

d.

Expert Solution

Explanation of Solution

Computation of amount of cash paid as stock issue costs:

Particulars	Amount($)
Cash of Company A	65,000
Cash of Company B	15,000
Less: Cash of Combined entity	56,000
Amount of cash paid as stock issue costs	24,000

Table (4)

e.

To determine

To compute: The total market value of shares issued at date of combination.

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).

e.

Expert Solution

Explanation of Solution

Computation of total market value of shares issued at date of combination:

Particulars	Amount($)
Total market value of shares of combined entity ($117,000+$553,000+$24,000)	694,000
Less: Total market value of shares of Company A ($96,000+$234,000)	330,000
Total market value of shares issued	364,000

Table (5)

f.

To determine

To compute: The fair value of inventory at date of combination.

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).

f.

Expert Solution

Explanation of Solution

Computation of fair value of inventory at date of combination:

Particulars	Amount($)
Fair value of inventory of Combined entity	320,000
Less: Fair value of inventory of Company A	210,000
Fair value of inventory	110,000

Table (6)

g.

To determine

To compute: The fair value of net assets at date of combination.

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).

g.

Expert Solution

Explanation of Solution

Computation of fair value of net assets at date of combination:

Particulars	Amount($)
Total assets ($15,000+$30,000+$110,000+$293,000)	448,000
Less: Total liabilities ($22,000+$120,000)	142,000
Net assets	306,000

Table (7)

h.

To determine

To compute: The amount of goodwill in the combined balance sheet.

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).

h.

Expert Solution

Explanation of Solution

Computation of amount of goodwill in the combined balance sheet:

Particulars	Amount($)
Total market value of shares issued	364,000
Net assets	306,000
Amount of goodwill	58,000

Table (8)

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Students have asked these similar questions

ABC Corp. acquired all the assets and liabilities of XYZ Corporation by issuing shares of its common stock. On January 1, 2020, partial balance sheet data for the companies prior to the business combination and immediately following the combination is provided. ABC Corp. XYZ Corp. Combination Cash 65,000 25,000 90,000 Accounts receivable 72,000 20,000 94,000 Inventory 33,000 45,000 88,000 PPE (net) 400,000 150,000 650,000 Goodwill ? Total Assets 570,000 240,000 ? Accounts payable 50,000 25,000 75,000 Bonds payable 250,000 100,000 350,000 Common stock, P2 par 100,000 25,000 160,000 Share Premium 65,000 20,000 245,000 Retained earnings 105,000 70,000 ? Total Liab and Equity 570,000 240,000 ? What is the fair value of the net assets held by XYZ Corp at the date of combination? Group of answer choices 115,000 270,000 497,000…

Answer 2

Question

Chapter 1, Problem 1.39P

a.

To determine

To compute: The number of shares issue to acquire Company B.

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).

a.

Expert Solution

Explanation of Solution

Computation of number of shares issued by Company B:

Particulars	Amount($)
Common stock of Company B	70,000
Price of issue	5
Number of shares issued	14,000

Table (1)

b.

To determine

To compute: The price per share at the time of issue by Company B.

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).

b.

Expert Solution

Explanation of Solution

Computation of price per share at the time of issue by Company E:

Particulars	Amount($)
Total value of common stock combined entity ($70,000+$42,000)	112,000
Number of shares issued	14,000
Price of issue	8.00

Table (2)

c.

To determine

To compute: The number of shares issued at the date of combination.

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).

c.

Expert Solution

Explanation of Solution

Computation of number of shares issued at the date of combination:

Particulars	Amount($)
Common stock value ($117,00−$96,000)	21,000
Price of issue	3
Number of shares issued	7,000

Table (3)

d.

To determine

To compute: The amount of cash paid as stock issue costs.

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).

d.

Expert Solution

Explanation of Solution

Computation of amount of cash paid as stock issue costs:

Particulars	Amount($)
Cash of Company A	65,000
Cash of Company B	15,000
Less: Cash of Combined entity	56,000
Amount of cash paid as stock issue costs	24,000

Table (4)

e.

To determine

To compute: The total market value of shares issued at date of combination.

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).

e.

Expert Solution

Explanation of Solution

Computation of total market value of shares issued at date of combination:

Particulars	Amount($)
Total market value of shares of combined entity ($117,000+$553,000+$24,000)	694,000
Less: Total market value of shares of Company A ($96,000+$234,000)	330,000
Total market value of shares issued	364,000

Table (5)

f.

To determine

To compute: The fair value of inventory at date of combination.

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).

f.

Expert Solution

Explanation of Solution

Computation of fair value of inventory at date of combination:

Particulars	Amount($)
Fair value of inventory of Combined entity	320,000
Less: Fair value of inventory of Company A	210,000
Fair value of inventory	110,000

Table (6)

g.

To determine

To compute: The fair value of net assets at date of combination.

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).

g.

Expert Solution

Explanation of Solution

Computation of fair value of net assets at date of combination:

Particulars	Amount($)
Total assets ($15,000+$30,000+$110,000+$293,000)	448,000
Less: Total liabilities ($22,000+$120,000)	142,000
Net assets	306,000

Table (7)

h.

To determine

To compute: The amount of goodwill in the combined balance sheet.

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).

h.

Expert Solution

Explanation of Solution

Computation of amount of goodwill in the combined balance sheet:

Particulars	Amount($)
Total market value of shares issued	364,000
Net assets	306,000
Amount of goodwill	58,000

Table (8)

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Answer 3

Question

Chapter 1, Problem 1.39P

a.

To determine

To compute: The number of shares issue to acquire Company B.

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).

a.

Expert Solution

Explanation of Solution

Computation of number of shares issued by Company B:

Particulars	Amount($)
Common stock of Company B	70,000
Price of issue	5
Number of shares issued	14,000

Table (1)

b.

To determine

To compute: The price per share at the time of issue by Company B.

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).

b.

Expert Solution

Explanation of Solution

Computation of price per share at the time of issue by Company E:

Particulars	Amount($)
Total value of common stock combined entity ($70,000+$42,000)	112,000
Number of shares issued	14,000
Price of issue	8.00

Table (2)

c.

To determine

To compute: The number of shares issued at the date of combination.

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).

c.

Expert Solution

Explanation of Solution

Computation of number of shares issued at the date of combination:

Particulars	Amount($)
Common stock value ($117,00−$96,000)	21,000
Price of issue	3
Number of shares issued	7,000

Table (3)

d.

To determine

To compute: The amount of cash paid as stock issue costs.

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).

d.

Expert Solution

Explanation of Solution

Computation of amount of cash paid as stock issue costs:

Particulars	Amount($)
Cash of Company A	65,000
Cash of Company B	15,000
Less: Cash of Combined entity	56,000
Amount of cash paid as stock issue costs	24,000

Table (4)

e.

To determine

To compute: The total market value of shares issued at date of combination.

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).

e.

Expert Solution

Explanation of Solution

Computation of total market value of shares issued at date of combination:

Particulars	Amount($)
Total market value of shares of combined entity ($117,000+$553,000+$24,000)	694,000
Less: Total market value of shares of Company A ($96,000+$234,000)	330,000
Total market value of shares issued	364,000

Table (5)

f.

To determine

To compute: The fair value of inventory at date of combination.

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).

f.

Expert Solution

Explanation of Solution

Computation of fair value of inventory at date of combination:

Particulars	Amount($)
Fair value of inventory of Combined entity	320,000
Less: Fair value of inventory of Company A	210,000
Fair value of inventory	110,000

Table (6)

g.

To determine

To compute: The fair value of net assets at date of combination.

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).

g.

Expert Solution

Explanation of Solution

Computation of fair value of net assets at date of combination:

Particulars	Amount($)
Total assets ($15,000+$30,000+$110,000+$293,000)	448,000
Less: Total liabilities ($22,000+$120,000)	142,000
Net assets	306,000

Table (7)

h.

To determine

To compute: The amount of goodwill in the combined balance sheet.

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).

h.

Expert Solution

Explanation of Solution

Computation of amount of goodwill in the combined balance sheet:

Particulars	Amount($)
Total market value of shares issued	364,000
Net assets	306,000
Amount of goodwill	58,000

Table (8)

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Answer 4

Question

Chapter 1, Problem 1.39P

a.

To determine

To compute: The number of shares issue to acquire Company B.

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).

a.

Expert Solution

Explanation of Solution

Computation of number of shares issued by Company B:

Particulars	Amount($)
Common stock of Company B	70,000
Price of issue	5
Number of shares issued	14,000

Table (1)

b.

To determine

To compute: The price per share at the time of issue by Company B.

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).

b.

Expert Solution

Explanation of Solution

Computation of price per share at the time of issue by Company E:

Particulars	Amount($)
Total value of common stock combined entity ($70,000+$42,000)	112,000
Number of shares issued	14,000
Price of issue	8.00

Table (2)

c.

To determine

To compute: The number of shares issued at the date of combination.

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).

c.

Expert Solution

Explanation of Solution

Computation of number of shares issued at the date of combination:

Particulars	Amount($)
Common stock value ($117,00−$96,000)	21,000
Price of issue	3
Number of shares issued	7,000

Table (3)

d.

To determine

To compute: The amount of cash paid as stock issue costs.

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).

d.

Expert Solution

Explanation of Solution

Computation of amount of cash paid as stock issue costs:

Particulars	Amount($)
Cash of Company A	65,000
Cash of Company B	15,000
Less: Cash of Combined entity	56,000
Amount of cash paid as stock issue costs	24,000

Table (4)

e.

To determine

To compute: The total market value of shares issued at date of combination.

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).

e.

Expert Solution

Explanation of Solution

Computation of total market value of shares issued at date of combination:

Particulars	Amount($)
Total market value of shares of combined entity ($117,000+$553,000+$24,000)	694,000
Less: Total market value of shares of Company A ($96,000+$234,000)	330,000
Total market value of shares issued	364,000

Table (5)

f.

To determine

To compute: The fair value of inventory at date of combination.

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).

f.

Expert Solution

Explanation of Solution

Computation of fair value of inventory at date of combination:

Particulars	Amount($)
Fair value of inventory of Combined entity	320,000
Less: Fair value of inventory of Company A	210,000
Fair value of inventory	110,000

Table (6)

g.

To determine

To compute: The fair value of net assets at date of combination.

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).

g.

Expert Solution

Explanation of Solution

Computation of fair value of net assets at date of combination:

Particulars	Amount($)
Total assets ($15,000+$30,000+$110,000+$293,000)	448,000
Less: Total liabilities ($22,000+$120,000)	142,000
Net assets	306,000

Table (7)

h.

To determine

To compute: The amount of goodwill in the combined balance sheet.

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).

h.

Expert Solution

Explanation of Solution

Computation of amount of goodwill in the combined balance sheet:

Particulars	Amount($)
Total market value of shares issued	364,000
Net assets	306,000
Amount of goodwill	58,000

Table (8)

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Answer 5

Chapter 1, Problem 1.39P

a.

To determine

To compute: The number of shares issue to acquire Company B.

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).

a.

Expert Solution

Explanation of Solution

Computation of number of shares issued by Company B:

Particulars	Amount($)
Common stock of Company B	70,000
Price of issue	5
Number of shares issued	14,000

Table (1)

b.

To determine

To compute: The price per share at the time of issue by Company B.

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).

b.

Expert Solution

Explanation of Solution

Computation of price per share at the time of issue by Company E:

Particulars	Amount($)
Total value of common stock combined entity ($70,000+$42,000)	112,000
Number of shares issued	14,000
Price of issue	8.00

Table (2)

c.

To determine

To compute: The number of shares issued at the date of combination.

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).

c.

Expert Solution

Explanation of Solution

Computation of number of shares issued at the date of combination:

Particulars	Amount($)
Common stock value ($117,00−$96,000)	21,000
Price of issue	3
Number of shares issued	7,000

Table (3)

d.

To determine

To compute: The amount of cash paid as stock issue costs.

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).

d.

Expert Solution

Explanation of Solution

Computation of amount of cash paid as stock issue costs:

Particulars	Amount($)
Cash of Company A	65,000
Cash of Company B	15,000
Less: Cash of Combined entity	56,000
Amount of cash paid as stock issue costs	24,000

Table (4)

e.

To determine

To compute: The total market value of shares issued at date of combination.

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).

e.

Expert Solution

Explanation of Solution

Computation of total market value of shares issued at date of combination:

Particulars	Amount($)
Total market value of shares of combined entity ($117,000+$553,000+$24,000)	694,000
Less: Total market value of shares of Company A ($96,000+$234,000)	330,000
Total market value of shares issued	364,000

Table (5)

f.

To determine

To compute: The fair value of inventory at date of combination.

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).

f.

Expert Solution

Explanation of Solution

Computation of fair value of inventory at date of combination:

Particulars	Amount($)
Fair value of inventory of Combined entity	320,000
Less: Fair value of inventory of Company A	210,000
Fair value of inventory	110,000

Table (6)

g.

To determine

To compute: The fair value of net assets at date of combination.

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).

g.

Expert Solution

Explanation of Solution

Computation of fair value of net assets at date of combination:

Particulars	Amount($)
Total assets ($15,000+$30,000+$110,000+$293,000)	448,000
Less: Total liabilities ($22,000+$120,000)	142,000
Net assets	306,000

Table (7)

h.

To determine

To compute: The amount of goodwill in the combined balance sheet.

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).

h.

Expert Solution

Explanation of Solution

Computation of amount of goodwill in the combined balance sheet:

Particulars	Amount($)
Total market value of shares issued	364,000
Net assets	306,000
Amount of goodwill	58,000

Table (8)

Answer 6

Chapter 1, Problem 1.39P

a.

To determine

To compute: The number of shares issue to acquire Company B.

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).

a.

Expert Solution

Explanation of Solution

Computation of number of shares issued by Company B:

Particulars	Amount($)
Common stock of Company B	70,000
Price of issue	5
Number of shares issued	14,000

Table (1)

Answer 7

Chapter 1, Problem 1.39P

a.

To determine

To compute: The number of shares issue to acquire Company B.

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).

Answer 8

a.

Expert Solution

Explanation of Solution

Computation of number of shares issued by Company B:

Particulars	Amount($)
Common stock of Company B	70,000
Price of issue	5
Number of shares issued	14,000

Table (1)

Answer 9

a.

Expert Solution

Answer 10

a.

Expert Solution

Answer 11

Expert Solution

Answer 12

b.

To determine

To compute: The price per share at the time of issue by Company B.

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).

b.

Expert Solution

Explanation of Solution

Computation of price per share at the time of issue by Company E:

Particulars	Amount($)
Total value of common stock combined entity ($70,000+$42,000)	112,000
Number of shares issued	14,000
Price of issue	8.00

Table (2)

Answer 13

b.

To determine

To compute: The price per share at the time of issue by Company B.

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).

Answer 14

b.

Expert Solution

Explanation of Solution

Computation of price per share at the time of issue by Company E:

Particulars	Amount($)
Total value of common stock combined entity ($70,000+$42,000)	112,000
Number of shares issued	14,000
Price of issue	8.00

Table (2)

Answer 15

b.

Expert Solution

Answer 16

b.

Expert Solution

Answer 17

Expert Solution

Answer 18

c.

To determine

To compute: The number of shares issued at the date of combination.

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).

c.

Expert Solution

Explanation of Solution

Computation of number of shares issued at the date of combination:

Particulars	Amount($)
Common stock value ($117,00−$96,000)	21,000
Price of issue	3
Number of shares issued	7,000

Table (3)

Answer 19

c.

To determine

To compute: The number of shares issued at the date of combination.

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).

Answer 20

c.

Expert Solution

Explanation of Solution

Computation of number of shares issued at the date of combination:

Particulars	Amount($)
Common stock value ($117,00−$96,000)	21,000
Price of issue	3
Number of shares issued	7,000

Table (3)

Answer 21

c.

Expert Solution

Answer 22

c.

Expert Solution

Answer 23

Expert Solution

Answer 24

d.

To determine

To compute: The amount of cash paid as stock issue costs.

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).

d.

Expert Solution

Explanation of Solution

Computation of amount of cash paid as stock issue costs:

Particulars	Amount($)
Cash of Company A	65,000
Cash of Company B	15,000
Less: Cash of Combined entity	56,000
Amount of cash paid as stock issue costs	24,000

Table (4)

Answer 25

d.

To determine

To compute: The amount of cash paid as stock issue costs.

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).

Answer 26

d.

Expert Solution

Explanation of Solution

Computation of amount of cash paid as stock issue costs:

Particulars	Amount($)
Cash of Company A	65,000
Cash of Company B	15,000
Less: Cash of Combined entity	56,000
Amount of cash paid as stock issue costs	24,000

Table (4)

Answer 27

d.

Expert Solution

Answer 28

d.

Expert Solution

Answer 29

Expert Solution

Answer 30

e.

To determine

To compute: The total market value of shares issued at date of combination.

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).

e.

Expert Solution

Explanation of Solution

Computation of total market value of shares issued at date of combination:

Particulars	Amount($)
Total market value of shares of combined entity ($117,000+$553,000+$24,000)	694,000
Less: Total market value of shares of Company A ($96,000+$234,000)	330,000
Total market value of shares issued	364,000

Table (5)

Answer 31

e.

To determine

To compute: The total market value of shares issued at date of combination.

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).

Answer 32

e.

Expert Solution

Explanation of Solution

Computation of total market value of shares issued at date of combination:

Particulars	Amount($)
Total market value of shares of combined entity ($117,000+$553,000+$24,000)	694,000
Less: Total market value of shares of Company A ($96,000+$234,000)	330,000
Total market value of shares issued	364,000

Table (5)

Answer 33

e.

Expert Solution

Answer 34

e.

Expert Solution

Answer 35

Expert Solution

Answer 36

f.

To determine

To compute: The fair value of inventory at date of combination.

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).

f.

Expert Solution

Explanation of Solution

Computation of fair value of inventory at date of combination:

Particulars	Amount($)
Fair value of inventory of Combined entity	320,000
Less: Fair value of inventory of Company A	210,000
Fair value of inventory	110,000

Table (6)

Answer 37

f.

To determine

To compute: The fair value of inventory at date of combination.

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).

Answer 38

f.

Expert Solution

Explanation of Solution

Computation of fair value of inventory at date of combination:

Particulars	Amount($)
Fair value of inventory of Combined entity	320,000
Less: Fair value of inventory of Company A	210,000
Fair value of inventory	110,000

Table (6)

Answer 39

f.

Expert Solution

Answer 40

f.

Expert Solution

Answer 41

Expert Solution

Answer 42

g.

To determine

To compute: The fair value of net assets at date of combination.

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).

g.

Expert Solution

Explanation of Solution

Computation of fair value of net assets at date of combination:

Particulars	Amount($)
Total assets ($15,000+$30,000+$110,000+$293,000)	448,000
Less: Total liabilities ($22,000+$120,000)	142,000
Net assets	306,000

Table (7)

Answer 43

g.

To determine

To compute: The fair value of net assets at date of combination.

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).

Answer 44

g.

Expert Solution

Explanation of Solution

Computation of fair value of net assets at date of combination:

Particulars	Amount($)
Total assets ($15,000+$30,000+$110,000+$293,000)	448,000
Less: Total liabilities ($22,000+$120,000)	142,000
Net assets	306,000

Table (7)

Answer 45

g.

Expert Solution

Answer 46

g.

Expert Solution

Answer 47

Expert Solution

Answer 48

h.

To determine

To compute: The amount of goodwill in the combined balance sheet.

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).

h.

Expert Solution

Explanation of Solution

Computation of amount of goodwill in the combined balance sheet:

Particulars	Amount($)
Total market value of shares issued	364,000
Net assets	306,000
Amount of goodwill	58,000

Table (8)

Answer 49

h.

To determine

To compute: The amount of goodwill in the combined balance sheet.

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).

Answer 50

h.

Expert Solution

Explanation of Solution

Computation of amount of goodwill in the combined balance sheet:

Particulars	Amount($)
Total market value of shares issued	364,000
Net assets	306,000
Amount of goodwill	58,000

Table (8)

Answer 51

h.

Expert Solution

Answer 52

h.

Expert Solution

Answer 53

Expert Solution

Answer 54

Ch. 1 - What types of circumstances would encourage...Ch. 1 - How would the decision to dispose of a segment of...Ch. 1 - Prob. 1.3Q Ch. 1 - Prob. 1.4Q Ch. 1 - Prob. 1.5Q Ch. 1 - Prob. 1.6Q Ch. 1 - Prob. 1.8Q Ch. 1 - Prob. 1.9Q Ch. 1 - Prob. 1.10Q Ch. 1 - Prob. 1.11Q

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