Stock acquisition (fair value is different from book value) The following financial statement information is for an investor company and an investee company on January 1, 2022. On January 1, 2022, the investor company's common stock had a traded market value of $28 per share, and the investee company's common stock had a traded market value of $21 per share. Book Values Fair Values Investor Investee Investor Investee $180.000 $86,400 384,000 192,000 420,000 240,000 432,000 192.000 480,000 249,600 160.000 153.600 $1.008.000 $480.000 $1.240.000 $729,600 $288.000 $153,600 $320.000 $164,000 40.000 32.000 536.000 275.200 144.000 19,200 $1.008.000 $480.000 $720,000 $326,400 $920,000 $565,600 Receivables & inventories $192.000 $96.000 Land Property & equipment Trademarks & patents Total assets Liabilities Common stock ($1 par) Additional paid-in capital Retained earnings Total liabilities & equity Net assets Assume that the investor company issued 30,000 new shares of the investor company's common stock in exchange for 100% of the common stock of the investee company, in a transaction that qualifies as a business combination. The financial information presented, above, was prepared immediately before this transaction. Provide the Investor Company's balance (i.e., on the investor's books, before consolidation) for "Investment in Investee" immediately following the acquisition of the investee's common stock: Ⓒ$840,000 O$630,000 O$565,600 O$354,400
Stock acquisition (fair value is different from book value) The following financial statement information is for an investor company and an investee company on January 1, 2022. On January 1, 2022, the investor company's common stock had a traded market value of $28 per share, and the investee company's common stock had a traded market value of $21 per share. Book Values Fair Values Investor Investee Investor Investee $180.000 $86,400 384,000 192,000 420,000 240,000 432,000 192.000 480,000 249,600 160.000 153.600 $1.008.000 $480.000 $1.240.000 $729,600 $288.000 $153,600 $320.000 $164,000 40.000 32.000 536.000 275.200 144.000 19,200 $1.008.000 $480.000 $720,000 $326,400 $920,000 $565,600 Receivables & inventories $192.000 $96.000 Land Property & equipment Trademarks & patents Total assets Liabilities Common stock ($1 par) Additional paid-in capital Retained earnings Total liabilities & equity Net assets Assume that the investor company issued 30,000 new shares of the investor company's common stock in exchange for 100% of the common stock of the investee company, in a transaction that qualifies as a business combination. The financial information presented, above, was prepared immediately before this transaction. Provide the Investor Company's balance (i.e., on the investor's books, before consolidation) for "Investment in Investee" immediately following the acquisition of the investee's common stock: Ⓒ$840,000 O$630,000 O$565,600 O$354,400
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:Stock acquisition (fair value is different from book value)
The following financial statement information is for an investor company and an investee company on January 1, 2022. On January 1, 2022, the investor company's common stock had a traded market value of $28 per share, and the investee company's common
stock had a traded market value of $21 per share.
Book Values
Fair Values
Investor Investee Investor Investee
Receivables & inventories $192,000 $96,000 $180,000 $86,400
384,000 192,000 420,000 240,000
432,000 192,000
480,000 249,600
160,000 153,600
$1,008,000 $480,000 $1,240,000 $729,600
$288,000 $153,600 $320,000 $164,000
40,000 32,000
536,000 275,200
144,000 19,200
$1,008,000 $480,000
$720,000 $326,400 $920,000 $565,600
Land
Property & equipment
Trademarks & patents
Total assets
Liabilities
Common stock ($1 par)
Additional paid-in capital
Retained earnings
Total liabilities & equity
Net assets
Assume that the investor company issued 30,000 new shares of the investor company's common stock in exchange for 100% of the common stock of the investee company, in a transaction that qualifies as a business combination. The financial information
presented, above, was prepared immediately before this transaction. Provide the Investor Company's balance (i.e., on the investor's books, before consolidation) for "Investment in Investee" immediately following the acquisition of the investee's common stock:
O$840,000
O$630,000
O$565,600
O$354,400
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