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FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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2 PHASE & STOW co. WITH INCOME from COMBINATION Phase Corporation acquires the net assets of Stow Company in a merger business combination in which Stow Company is dissolved. The assets and liabilities of Phase & Stow on January 2, xxx, the date pf the merger is as follows: STOW COMPANY BALANCE SHEET PHASE CO. BVs FVs Cash 600,000 50,000 50,000 Net receivables 100,000 150,000 140,000 Inventories 120,000 200,000 250,000 Land 440,000 50,000 100,000 Buildings- net 760,000 300,000 500,000 Equipment- net 150,000 250,000 350,000 Patents 50,000 Investment in STOW Company Total assets 2,170,000 1,000,000 1,440,000 Accounts payable Notes payable 100,000 60,000 60,000 150,000 135,000 C/S Ordinary shares, P 10 par Share premium 1,500,000 500,000 APIC 300,000 200,000 Retained earnings 270,000 90,000 Total liabilities & equity 2,170,000 1,000,000 Referring to Case 1, except that Phase Corporation issues 50,000 shares of its P 10 par ordinary share with a market value of P 20 per share, and it also gives a 10% five-year note payable for P 150,000 for the Net Assets of Stow Company Phase also paid P 20,000 in direct acquisition costs and P 15,000 stock issuance costs. STEPS IN BUSINESS COMBINATION: UPON ACQUISITION 1 Determine the acquisition cost 2 Determine the market value of the net assets acquired 3 Compare Acquisition COST with MARKET VALUES of Net Assets acquired 4 On the acquirer's books, RECORD the Assets acquired (including INCOME from Acquisition) and Liabilities assumed, with a corresponding Credit to the consideration paid. 5 Immediately after the business combination, PREPARE the BALANCE SHEET of the ACQUIRER. REQUIREMENTS: IN GOOD FORM! '1. Compute the Acquisition cost 2. Compute to Market Values of Net Assets Acquired 3. Journal entries upon acquisition '4. Balance Sheet upon acquisition
Transcribed Image Text:2 PHASE & STOW co. WITH INCOME from COMBINATION Phase Corporation acquires the net assets of Stow Company in a merger business combination in which Stow Company is dissolved. The assets and liabilities of Phase & Stow on January 2, xxx, the date pf the merger is as follows: STOW COMPANY BALANCE SHEET PHASE CO. BVs FVs Cash 600,000 50,000 50,000 Net receivables 100,000 150,000 140,000 Inventories 120,000 200,000 250,000 Land 440,000 50,000 100,000 Buildings- net 760,000 300,000 500,000 Equipment- net 150,000 250,000 350,000 Patents 50,000 Investment in STOW Company Total assets 2,170,000 1,000,000 1,440,000 Accounts payable Notes payable 100,000 60,000 60,000 150,000 135,000 C/S Ordinary shares, P 10 par Share premium 1,500,000 500,000 APIC 300,000 200,000 Retained earnings 270,000 90,000 Total liabilities & equity 2,170,000 1,000,000 Referring to Case 1, except that Phase Corporation issues 50,000 shares of its P 10 par ordinary share with a market value of P 20 per share, and it also gives a 10% five-year note payable for P 150,000 for the Net Assets of Stow Company Phase also paid P 20,000 in direct acquisition costs and P 15,000 stock issuance costs. STEPS IN BUSINESS COMBINATION: UPON ACQUISITION 1 Determine the acquisition cost 2 Determine the market value of the net assets acquired 3 Compare Acquisition COST with MARKET VALUES of Net Assets acquired 4 On the acquirer's books, RECORD the Assets acquired (including INCOME from Acquisition) and Liabilities assumed, with a corresponding Credit to the consideration paid. 5 Immediately after the business combination, PREPARE the BALANCE SHEET of the ACQUIRER. REQUIREMENTS: IN GOOD FORM! '1. Compute the Acquisition cost 2. Compute to Market Values of Net Assets Acquired 3. Journal entries upon acquisition '4. Balance Sheet upon acquisition
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