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Who is the investor? Why does it matter? Assume that we have an acquisition. But, we don't yet know who the investor is. Here are the facts: Company B Exchanged all of its stock for the stock issued by Company A Can elect one-half of the Board of Directors Company A Issued stock valued at $24.0 billion Can elect one-half of the Board of Directors Its Chairman will succeed the Chairman from Company B in 3 years Its Chairman will become Chairman of the new entity for the first 3 years Its CEO will become CEO of the combined company Its CFO will become CFO of the combined company a. Which company is the acquirer in your opinion? Company Av b. Now, assume the following facts about the financial profiles of these two companies. If Company A is deemed If Company B is deemed to be the Subsidiary $12.0 billion to be the Subsidiary $5.0 billion 10.0 billion 6.0 billion $15.0 billion Fair Values Tangible net assets Identifiable intangible assets Total ($ billions) Identifiable net assets Goodwill $18.0 billion Determine the fair values of the identifiable net assets (and goodwill, if any) assuming the transaction qualifies as a business combination and Company A is the accounting acquirer. Then, determine the fair values of the identifiable net assets (and goodwill, if any) assuming the transaction qualifies as a business combination and Company B is the accounting acquirer. Enter answers in billions If Company A is the accounting acquirer $18,000,000,00 x 6,000,000,000 x If Company B is the accounting acquirer $15,000,000,00 x 9,000,000,000 x

Who is the investor? Why does it matter? Assume that we have an acquisition. But, we don't yet know who the investor is. Here are the facts: Company B Exchanged all of its stock for the stock issued by Company A Can elect one-half of the Board of Directors Company A Issued stock valued at $24.0 billion Can elect one-half of the Board of Directors Its Chairman will succeed the Chairman from Company B in 3 years Its Chairman will become Chairman of the new entity for the first 3 years Its CEO will become CEO of the combined company Its CFO will become CFO of the combined company a. Which company is the acquirer in your opinion? Company Av b. Now, assume the following facts about the financial profiles of these two companies. If Company A is deemed If Company B is deemed to be the Subsidiary $12.0 billion to be the Subsidiary $5.0 billion 10.0 billion 6.0 billion $15.0 billion Fair Values Tangible net assets Identifiable intangible assets Total ($ billions) Identifiable net assets Goodwill $18.0 billion Determine the fair values of the identifiable net assets (and goodwill, if any) assuming the transaction qualifies as a business combination and Company A is the accounting acquirer. Then, determine the fair values of the identifiable net assets (and goodwill, if any) assuming the transaction qualifies as a business combination and Company B is the accounting acquirer. Enter answers in billions If Company A is the accounting acquirer $18,000,000,00 x 6,000,000,000 x If Company B is the accounting acquirer $15,000,000,00 x 9,000,000,000 x

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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Who is the investor? Why does it matter? Assume that we have an acquisition. But, we don't yet know who the investor is. Here are the facts: Company B Exchanged all of its stock for the stock issued by Company A Can elect one-half of the Board of Directors Company A Issued stock valued at $24.0 billion Can elect one-half of the Board of Directors Its Chairman will succeed the Chairman from Company B in 3 years Its Chairman will become Chairman of the new entity for the first 3 years Its CEO will become CEO of the combined company Its CFO will become CFO of the combined company a. Which company is the acquirer in your opinion? Company A b. Now, assume the following facts about the financial profiles of these two companies. If Company A is deemed If Company B is deemed to be the Subsidiary $12.0 billion to be the Subsidiary $5.0 billion Fair Values Tangible net assets Identifiable intangible assets Total ($ billions) Identifiable net assets Goodwill $18.0 billion 6.0 billion If Company A is the accounting acquirer Determine the fair values of the identifiable net assets (and goodwill, if any) assuming the transaction qualifies as a business combination and Company A is the accounting acquirer. Then, determine the fair values of the identifiable net assets (and goodwill, if any) assuming the transaction qualifies as a business combination and Company B is the accounting acquirer. Enter answers in billions $18,000,000,00 * 6,000,000,000 x $15.0 billion 10.0 billion If Company B is the accounting acquirer $15,000,000,00 * 9,000,000,000 x
Transcribed Image Text:Who is the investor? Why does it matter? Assume that we have an acquisition. But, we don't yet know who the investor is. Here are the facts: Company B Exchanged all of its stock for the stock issued by Company A Can elect one-half of the Board of Directors Company A Issued stock valued at $24.0 billion Can elect one-half of the Board of Directors Its Chairman will succeed the Chairman from Company B in 3 years Its Chairman will become Chairman of the new entity for the first 3 years Its CEO will become CEO of the combined company Its CFO will become CFO of the combined company a. Which company is the acquirer in your opinion? Company A b. Now, assume the following facts about the financial profiles of these two companies. If Company A is deemed If Company B is deemed to be the Subsidiary $12.0 billion to be the Subsidiary $5.0 billion Fair Values Tangible net assets Identifiable intangible assets Total ($ billions) Identifiable net assets Goodwill $18.0 billion 6.0 billion If Company A is the accounting acquirer Determine the fair values of the identifiable net assets (and goodwill, if any) assuming the transaction qualifies as a business combination and Company A is the accounting acquirer. Then, determine the fair values of the identifiable net assets (and goodwill, if any) assuming the transaction qualifies as a business combination and Company B is the accounting acquirer. Enter answers in billions $18,000,000,00 * 6,000,000,000 x $15.0 billion 10.0 billion If Company B is the accounting acquirer $15,000,000,00 * 9,000,000,000 x
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