Accounting for business combination uses two methods, the purchase method and the pooling of interests method, but now all business combinations must use the acquisition method, many companies financial statements will continue to include the effects of previous business combinations. Requirement 1 The number of outstanding shares did S have on its $5 par value shares.

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Answer 1

Question

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 1, Problem 1.39P

a

To determine

Introduction: Accounting for business combination uses two methods, the purchase method and the pooling of interests method, but now all business combinations must use the acquisition method, many companies financial statements will continue to include the effects of previous business combinations.

Requirement 1

The number of outstanding shares did S have on its $5 par value shares.

a

Expert Solution

Answer to Problem 1.39P

14,000 shares

Explanation of Solution

Book value of common stock held by S $70,000

Par value of shares $5

Number of shares at par value $5: 14,000 shares= $70,000 / $5

b.

To determine

Introduction: Accounting for business combination uses two methods, the purchase method and the pooling of interests method, but now all business combinations must use the acquisition method, many companies financial statements will continue to include the effects of previous business combinations.

Requirement 2

The price per share received at the time of issue, assuming that all share were issued.

b.

Expert Solution

Answer to Problem 1.39P

Price per share $8.00

Explanation of Solution

Given Common stock value $70,000

Additional paid in capital $42,000

Number of shares 14,000 shares

Price per share = Total Paid up capitalNumber of Share

Price per share = $70,000 + $42,00014,000 = $8.00

c.

To determine

Introduction: Accounting for business combination uses two methods, the purchase method and the pooling of interests method, but now all business combinations must use the acquisition method, many companies financial statements will continue to include the effects of previous business combinations.

Requirement 3

The number of shares P issued at the date of combination

c.

Expert Solution

Answer to Problem 1.39P

Number of shares issued at the date of combination 7,000 shares

Explanation of Solution

Given value of common stock of combined entity $117,000

Common stocks of P before combination $96,000

Number of shares issued at the date of combination=($117,000−$96,000)/$3= 7,000 shares

d.

To determine

Introduction: Accounting for business combination uses two methods, the purchase method and the pooling of interests method, but now all business combinations must use the acquisition method, many companies financial statements will continue to include the effects of previous business combinations.

Requirement 4

The amount of cash did P pay as stock issue.

d.

Expert Solution

Answer to Problem 1.39P

The amount of cash P paid $24,000.

Explanation of Solution

Given

P’s cash balance $65,000

S’s cash balance $15,000

Combined cash balance $56,000

Cash paid by P=$65,000+$15,000−$56,000=$24,000

e.

To determine

Introduction: Accounting for business combination uses two methods, the purchase method and the pooling of interests method, but now all business combinations must use the acquisition method, many companies financial statements will continue to include the effects of previous business combinations.

Requirement 5

The market value of P’s shares issued at the date of combination

e.

Expert Solution

Answer to Problem 1.39P

Market value of P’s shares $364,000.

Explanation of Solution

Given Stockholders’ equity of P: Common stock $96,000, Additional paid in capital $234,000

Cash paid by P $24,000

Stockholders’ equity of combined entity: common stock $117,000, Additional paid in capital $553,000

Value of P’s shares at the date of combination: $364,000 =($117,000 + $553,000 + $24,000)–($96,000 + $234,000)

f.

To determine

Introduction: Accounting for business combination uses two methods, the purchase method and the pooling of interests method, but now all business combinations must use the acquisition method, many companies financial statements will continue to include the effects of previous business combinations.

Requirement 6

The fair value of S’s inventory at the date of combination

f.

Expert Solution

Answer to Problem 1.39P

The fair value of S’s inventory $110,000

Explanation of Solution

Given inventory of P before combination $210,000

Inventory of combined entity $320,000

Fair value of inventory: $110,000=$320,000−$210,000

g.

To determine

Introduction: Accounting for business combination uses two methods, the purchase method and the pooling of interests method, but now all business combinations must use the acquisition method, many companies financial statements will continue to include the effects of previous business combinations.

Requirement 7

The fair value of S’s net assets at the date of combination

g.

Expert Solution

Answer to Problem 1.39P

The fair value of S’s net assets $306,000.

Explanation of Solution

Given:

Fair value of assets: Cash $15,000, Accounts receivable $30,000, Inventory $110,000, Building and equipment $293,000. Accounts payable $22,000, Bonds payable $120,000

Fair value of assets: $306,000=($15,000+$30,000+$110,000+$293,000)–($22,000+$120,000)

h

To determine

Introduction: Accounting for business combination uses two methods, the purchase method and the pooling of interests method, but now all business combinations must use the acquisition method, many companies financial statements will continue to include the effects of previous business combinations.

Requirement 8

The amount of goodwill if any will be reported in combined balance sheet.

h

Expert Solution

Answer to Problem 1.39P

The amount of goodwill $58,000

Explanation of Solution

Fair value of assets: $306,000=($15,000+$30,000+$110,000+$293,000)–($22,000+$120,000)

Market value of shares $364,000

Goodwill: $58,000=$364,000−$306,000

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Answer 2

Question

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 1, Problem 1.39P

a

To determine

Introduction: Accounting for business combination uses two methods, the purchase method and the pooling of interests method, but now all business combinations must use the acquisition method, many companies financial statements will continue to include the effects of previous business combinations.

Requirement 1

The number of outstanding shares did S have on its $5 par value shares.

a

Expert Solution

Answer to Problem 1.39P

14,000 shares

Explanation of Solution

Book value of common stock held by S $70,000

Par value of shares $5

Number of shares at par value $5: 14,000 shares= $70,000 / $5

b.

To determine

Introduction: Accounting for business combination uses two methods, the purchase method and the pooling of interests method, but now all business combinations must use the acquisition method, many companies financial statements will continue to include the effects of previous business combinations.

Requirement 2

The price per share received at the time of issue, assuming that all share were issued.

b.

Expert Solution

Answer to Problem 1.39P

Price per share $8.00

Explanation of Solution

Given Common stock value $70,000

Additional paid in capital $42,000

Number of shares 14,000 shares

Price per share = Total Paid up capitalNumber of Share

Price per share = $70,000 + $42,00014,000 = $8.00

c.

To determine

Introduction: Accounting for business combination uses two methods, the purchase method and the pooling of interests method, but now all business combinations must use the acquisition method, many companies financial statements will continue to include the effects of previous business combinations.

Requirement 3

The number of shares P issued at the date of combination

c.

Expert Solution

Answer to Problem 1.39P

Number of shares issued at the date of combination 7,000 shares

Explanation of Solution

Given value of common stock of combined entity $117,000

Common stocks of P before combination $96,000

Number of shares issued at the date of combination=($117,000−$96,000)/$3= 7,000 shares

d.

To determine

Introduction: Accounting for business combination uses two methods, the purchase method and the pooling of interests method, but now all business combinations must use the acquisition method, many companies financial statements will continue to include the effects of previous business combinations.

Requirement 4

The amount of cash did P pay as stock issue.

d.

Expert Solution

Answer to Problem 1.39P

The amount of cash P paid $24,000.

Explanation of Solution

Given

P’s cash balance $65,000

S’s cash balance $15,000

Combined cash balance $56,000

Cash paid by P=$65,000+$15,000−$56,000=$24,000

e.

To determine

Introduction: Accounting for business combination uses two methods, the purchase method and the pooling of interests method, but now all business combinations must use the acquisition method, many companies financial statements will continue to include the effects of previous business combinations.

Requirement 5

The market value of P’s shares issued at the date of combination

e.

Expert Solution

Answer to Problem 1.39P

Market value of P’s shares $364,000.

Explanation of Solution

Given Stockholders’ equity of P: Common stock $96,000, Additional paid in capital $234,000

Cash paid by P $24,000

Stockholders’ equity of combined entity: common stock $117,000, Additional paid in capital $553,000

Value of P’s shares at the date of combination: $364,000 =($117,000 + $553,000 + $24,000)–($96,000 + $234,000)

f.

To determine

Introduction: Accounting for business combination uses two methods, the purchase method and the pooling of interests method, but now all business combinations must use the acquisition method, many companies financial statements will continue to include the effects of previous business combinations.

Requirement 6

The fair value of S’s inventory at the date of combination

f.

Expert Solution

Answer to Problem 1.39P

The fair value of S’s inventory $110,000

Explanation of Solution

Given inventory of P before combination $210,000

Inventory of combined entity $320,000

Fair value of inventory: $110,000=$320,000−$210,000

g.

To determine

Introduction: Accounting for business combination uses two methods, the purchase method and the pooling of interests method, but now all business combinations must use the acquisition method, many companies financial statements will continue to include the effects of previous business combinations.

Requirement 7

The fair value of S’s net assets at the date of combination

g.

Expert Solution

Answer to Problem 1.39P

The fair value of S’s net assets $306,000.

Explanation of Solution

Given:

Fair value of assets: Cash $15,000, Accounts receivable $30,000, Inventory $110,000, Building and equipment $293,000. Accounts payable $22,000, Bonds payable $120,000

Fair value of assets: $306,000=($15,000+$30,000+$110,000+$293,000)–($22,000+$120,000)

h

To determine

Introduction: Accounting for business combination uses two methods, the purchase method and the pooling of interests method, but now all business combinations must use the acquisition method, many companies financial statements will continue to include the effects of previous business combinations.

Requirement 8

The amount of goodwill if any will be reported in combined balance sheet.

h

Expert Solution

Answer to Problem 1.39P

The amount of goodwill $58,000

Explanation of Solution

Fair value of assets: $306,000=($15,000+$30,000+$110,000+$293,000)–($22,000+$120,000)

Market value of shares $364,000

Goodwill: $58,000=$364,000−$306,000

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Answer 3

Question

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 1, Problem 1.39P

a

To determine

Introduction: Accounting for business combination uses two methods, the purchase method and the pooling of interests method, but now all business combinations must use the acquisition method, many companies financial statements will continue to include the effects of previous business combinations.

Requirement 1

The number of outstanding shares did S have on its $5 par value shares.

a

Expert Solution

Answer to Problem 1.39P

14,000 shares

Explanation of Solution

Book value of common stock held by S $70,000

Par value of shares $5

Number of shares at par value $5: 14,000 shares= $70,000 / $5

b.

To determine

Introduction: Accounting for business combination uses two methods, the purchase method and the pooling of interests method, but now all business combinations must use the acquisition method, many companies financial statements will continue to include the effects of previous business combinations.

Requirement 2

The price per share received at the time of issue, assuming that all share were issued.

b.

Expert Solution

Answer to Problem 1.39P

Price per share $8.00

Explanation of Solution

Given Common stock value $70,000

Additional paid in capital $42,000

Number of shares 14,000 shares

Price per share = Total Paid up capitalNumber of Share

Price per share = $70,000 + $42,00014,000 = $8.00

c.

To determine

Introduction: Accounting for business combination uses two methods, the purchase method and the pooling of interests method, but now all business combinations must use the acquisition method, many companies financial statements will continue to include the effects of previous business combinations.

Requirement 3

The number of shares P issued at the date of combination

c.

Expert Solution

Answer to Problem 1.39P

Number of shares issued at the date of combination 7,000 shares

Explanation of Solution

Given value of common stock of combined entity $117,000

Common stocks of P before combination $96,000

Number of shares issued at the date of combination=($117,000−$96,000)/$3= 7,000 shares

d.

To determine

Introduction: Accounting for business combination uses two methods, the purchase method and the pooling of interests method, but now all business combinations must use the acquisition method, many companies financial statements will continue to include the effects of previous business combinations.

Requirement 4

The amount of cash did P pay as stock issue.

d.

Expert Solution

Answer to Problem 1.39P

The amount of cash P paid $24,000.

Explanation of Solution

Given

P’s cash balance $65,000

S’s cash balance $15,000

Combined cash balance $56,000

Cash paid by P=$65,000+$15,000−$56,000=$24,000

e.

To determine

Introduction: Accounting for business combination uses two methods, the purchase method and the pooling of interests method, but now all business combinations must use the acquisition method, many companies financial statements will continue to include the effects of previous business combinations.

Requirement 5

The market value of P’s shares issued at the date of combination

e.

Expert Solution

Answer to Problem 1.39P

Market value of P’s shares $364,000.

Explanation of Solution

Given Stockholders’ equity of P: Common stock $96,000, Additional paid in capital $234,000

Cash paid by P $24,000

Stockholders’ equity of combined entity: common stock $117,000, Additional paid in capital $553,000

Value of P’s shares at the date of combination: $364,000 =($117,000 + $553,000 + $24,000)–($96,000 + $234,000)

f.

To determine

Introduction: Accounting for business combination uses two methods, the purchase method and the pooling of interests method, but now all business combinations must use the acquisition method, many companies financial statements will continue to include the effects of previous business combinations.

Requirement 6

The fair value of S’s inventory at the date of combination

f.

Expert Solution

Answer to Problem 1.39P

The fair value of S’s inventory $110,000

Explanation of Solution

Given inventory of P before combination $210,000

Inventory of combined entity $320,000

Fair value of inventory: $110,000=$320,000−$210,000

g.

To determine

Introduction: Accounting for business combination uses two methods, the purchase method and the pooling of interests method, but now all business combinations must use the acquisition method, many companies financial statements will continue to include the effects of previous business combinations.

Requirement 7

The fair value of S’s net assets at the date of combination

g.

Expert Solution

Answer to Problem 1.39P

The fair value of S’s net assets $306,000.

Explanation of Solution

Given:

Fair value of assets: Cash $15,000, Accounts receivable $30,000, Inventory $110,000, Building and equipment $293,000. Accounts payable $22,000, Bonds payable $120,000

Fair value of assets: $306,000=($15,000+$30,000+$110,000+$293,000)–($22,000+$120,000)

h

To determine

Introduction: Accounting for business combination uses two methods, the purchase method and the pooling of interests method, but now all business combinations must use the acquisition method, many companies financial statements will continue to include the effects of previous business combinations.

Requirement 8

The amount of goodwill if any will be reported in combined balance sheet.

h

Expert Solution

Answer to Problem 1.39P

The amount of goodwill $58,000

Explanation of Solution

Fair value of assets: $306,000=($15,000+$30,000+$110,000+$293,000)–($22,000+$120,000)

Market value of shares $364,000

Goodwill: $58,000=$364,000−$306,000

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Answer 4

Question

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 1, Problem 1.39P

a

To determine

Introduction: Accounting for business combination uses two methods, the purchase method and the pooling of interests method, but now all business combinations must use the acquisition method, many companies financial statements will continue to include the effects of previous business combinations.

Requirement 1

The number of outstanding shares did S have on its $5 par value shares.

a

Expert Solution

Answer to Problem 1.39P

14,000 shares

Explanation of Solution

Book value of common stock held by S $70,000

Par value of shares $5

Number of shares at par value $5: 14,000 shares= $70,000 / $5

b.

To determine

Introduction: Accounting for business combination uses two methods, the purchase method and the pooling of interests method, but now all business combinations must use the acquisition method, many companies financial statements will continue to include the effects of previous business combinations.

Requirement 2

The price per share received at the time of issue, assuming that all share were issued.

b.

Expert Solution

Answer to Problem 1.39P

Price per share $8.00

Explanation of Solution

Given Common stock value $70,000

Additional paid in capital $42,000

Number of shares 14,000 shares

Price per share = Total Paid up capitalNumber of Share

Price per share = $70,000 + $42,00014,000 = $8.00

c.

To determine

Introduction: Accounting for business combination uses two methods, the purchase method and the pooling of interests method, but now all business combinations must use the acquisition method, many companies financial statements will continue to include the effects of previous business combinations.

Requirement 3

The number of shares P issued at the date of combination

c.

Expert Solution

Answer to Problem 1.39P

Number of shares issued at the date of combination 7,000 shares

Explanation of Solution

Given value of common stock of combined entity $117,000

Common stocks of P before combination $96,000

Number of shares issued at the date of combination=($117,000−$96,000)/$3= 7,000 shares

d.

To determine

Introduction: Accounting for business combination uses two methods, the purchase method and the pooling of interests method, but now all business combinations must use the acquisition method, many companies financial statements will continue to include the effects of previous business combinations.

Requirement 4

The amount of cash did P pay as stock issue.

d.

Expert Solution

Answer to Problem 1.39P

The amount of cash P paid $24,000.

Explanation of Solution

Given

P’s cash balance $65,000

S’s cash balance $15,000

Combined cash balance $56,000

Cash paid by P=$65,000+$15,000−$56,000=$24,000

e.

To determine

Introduction: Accounting for business combination uses two methods, the purchase method and the pooling of interests method, but now all business combinations must use the acquisition method, many companies financial statements will continue to include the effects of previous business combinations.

Requirement 5

The market value of P’s shares issued at the date of combination

e.

Expert Solution

Answer to Problem 1.39P

Market value of P’s shares $364,000.

Explanation of Solution

Given Stockholders’ equity of P: Common stock $96,000, Additional paid in capital $234,000

Cash paid by P $24,000

Stockholders’ equity of combined entity: common stock $117,000, Additional paid in capital $553,000

Value of P’s shares at the date of combination: $364,000 =($117,000 + $553,000 + $24,000)–($96,000 + $234,000)

f.

To determine

Introduction: Accounting for business combination uses two methods, the purchase method and the pooling of interests method, but now all business combinations must use the acquisition method, many companies financial statements will continue to include the effects of previous business combinations.

Requirement 6

The fair value of S’s inventory at the date of combination

f.

Expert Solution

Answer to Problem 1.39P

The fair value of S’s inventory $110,000

Explanation of Solution

Given inventory of P before combination $210,000

Inventory of combined entity $320,000

Fair value of inventory: $110,000=$320,000−$210,000

g.

To determine

Introduction: Accounting for business combination uses two methods, the purchase method and the pooling of interests method, but now all business combinations must use the acquisition method, many companies financial statements will continue to include the effects of previous business combinations.

Requirement 7

The fair value of S’s net assets at the date of combination

g.

Expert Solution

Answer to Problem 1.39P

The fair value of S’s net assets $306,000.

Explanation of Solution

Given:

Fair value of assets: Cash $15,000, Accounts receivable $30,000, Inventory $110,000, Building and equipment $293,000. Accounts payable $22,000, Bonds payable $120,000

Fair value of assets: $306,000=($15,000+$30,000+$110,000+$293,000)–($22,000+$120,000)

h

To determine

Introduction: Accounting for business combination uses two methods, the purchase method and the pooling of interests method, but now all business combinations must use the acquisition method, many companies financial statements will continue to include the effects of previous business combinations.

Requirement 8

The amount of goodwill if any will be reported in combined balance sheet.

h

Expert Solution

Answer to Problem 1.39P

The amount of goodwill $58,000

Explanation of Solution

Fair value of assets: $306,000=($15,000+$30,000+$110,000+$293,000)–($22,000+$120,000)

Market value of shares $364,000

Goodwill: $58,000=$364,000−$306,000

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Answer 5

Chapter 1, Problem 1.39P

a

To determine

Introduction: Accounting for business combination uses two methods, the purchase method and the pooling of interests method, but now all business combinations must use the acquisition method, many companies financial statements will continue to include the effects of previous business combinations.

Requirement 1

The number of outstanding shares did S have on its $5 par value shares.

a

Expert Solution

Answer to Problem 1.39P

14,000 shares

Explanation of Solution

Book value of common stock held by S $70,000

Par value of shares $5

Number of shares at par value $5: 14,000 shares= $70,000 / $5

b.

To determine

Introduction: Accounting for business combination uses two methods, the purchase method and the pooling of interests method, but now all business combinations must use the acquisition method, many companies financial statements will continue to include the effects of previous business combinations.

Requirement 2

The price per share received at the time of issue, assuming that all share were issued.

b.

Expert Solution

Answer to Problem 1.39P

Price per share $8.00

Explanation of Solution

Given Common stock value $70,000

Additional paid in capital $42,000

Number of shares 14,000 shares

Price per share = Total Paid up capitalNumber of Share

Price per share = $70,000 + $42,00014,000 = $8.00

c.

To determine

Introduction: Accounting for business combination uses two methods, the purchase method and the pooling of interests method, but now all business combinations must use the acquisition method, many companies financial statements will continue to include the effects of previous business combinations.

Requirement 3

The number of shares P issued at the date of combination

c.

Expert Solution

Answer to Problem 1.39P

Number of shares issued at the date of combination 7,000 shares

Explanation of Solution

Given value of common stock of combined entity $117,000

Common stocks of P before combination $96,000

Number of shares issued at the date of combination=($117,000−$96,000)/$3= 7,000 shares

d.

To determine

Introduction: Accounting for business combination uses two methods, the purchase method and the pooling of interests method, but now all business combinations must use the acquisition method, many companies financial statements will continue to include the effects of previous business combinations.

Requirement 4

The amount of cash did P pay as stock issue.

d.

Expert Solution

Answer to Problem 1.39P

The amount of cash P paid $24,000.

Explanation of Solution

Given

P’s cash balance $65,000

S’s cash balance $15,000

Combined cash balance $56,000

Cash paid by P=$65,000+$15,000−$56,000=$24,000

e.

To determine

Introduction: Accounting for business combination uses two methods, the purchase method and the pooling of interests method, but now all business combinations must use the acquisition method, many companies financial statements will continue to include the effects of previous business combinations.

Requirement 5

The market value of P’s shares issued at the date of combination

e.

Expert Solution

Answer to Problem 1.39P

Market value of P’s shares $364,000.

Explanation of Solution

Given Stockholders’ equity of P: Common stock $96,000, Additional paid in capital $234,000

Cash paid by P $24,000

Stockholders’ equity of combined entity: common stock $117,000, Additional paid in capital $553,000

Value of P’s shares at the date of combination: $364,000 =($117,000 + $553,000 + $24,000)–($96,000 + $234,000)

f.

To determine

Introduction: Accounting for business combination uses two methods, the purchase method and the pooling of interests method, but now all business combinations must use the acquisition method, many companies financial statements will continue to include the effects of previous business combinations.

Requirement 6

The fair value of S’s inventory at the date of combination

f.

Expert Solution

Answer to Problem 1.39P

The fair value of S’s inventory $110,000

Explanation of Solution

Given inventory of P before combination $210,000

Inventory of combined entity $320,000

Fair value of inventory: $110,000=$320,000−$210,000

g.

To determine

Introduction: Accounting for business combination uses two methods, the purchase method and the pooling of interests method, but now all business combinations must use the acquisition method, many companies financial statements will continue to include the effects of previous business combinations.

Requirement 7

The fair value of S’s net assets at the date of combination

g.

Expert Solution

Answer to Problem 1.39P

The fair value of S’s net assets $306,000.

Explanation of Solution

Given:

Fair value of assets: Cash $15,000, Accounts receivable $30,000, Inventory $110,000, Building and equipment $293,000. Accounts payable $22,000, Bonds payable $120,000

Fair value of assets: $306,000=($15,000+$30,000+$110,000+$293,000)–($22,000+$120,000)

h

To determine

Introduction: Accounting for business combination uses two methods, the purchase method and the pooling of interests method, but now all business combinations must use the acquisition method, many companies financial statements will continue to include the effects of previous business combinations.

Requirement 8

The amount of goodwill if any will be reported in combined balance sheet.

h

Expert Solution

Answer to Problem 1.39P

The amount of goodwill $58,000

Explanation of Solution

Fair value of assets: $306,000=($15,000+$30,000+$110,000+$293,000)–($22,000+$120,000)

Market value of shares $364,000

Goodwill: $58,000=$364,000−$306,000

Answer 6

Chapter 1, Problem 1.39P

a

To determine

Introduction: Accounting for business combination uses two methods, the purchase method and the pooling of interests method, but now all business combinations must use the acquisition method, many companies financial statements will continue to include the effects of previous business combinations.

Requirement 1

The number of outstanding shares did S have on its $5 par value shares.

a

Expert Solution

Answer to Problem 1.39P

14,000 shares

Explanation of Solution

Book value of common stock held by S $70,000

Par value of shares $5

Number of shares at par value $5: 14,000 shares= $70,000 / $5

Answer 7

Chapter 1, Problem 1.39P

a

To determine

Introduction: Accounting for business combination uses two methods, the purchase method and the pooling of interests method, but now all business combinations must use the acquisition method, many companies financial statements will continue to include the effects of previous business combinations.

Requirement 1

The number of outstanding shares did S have on its $5 par value shares.

Answer 8

a

Expert Solution

Answer to Problem 1.39P

14,000 shares

Answer 9

a

Expert Solution

Answer 10

a

Expert Solution

Answer 11

Expert Solution

Answer 12

Explanation of Solution

Book value of common stock held by S $70,000

Par value of shares $5

Number of shares at par value $5: 14,000 shares= $70,000 / $5

Answer 13

b.

To determine

Introduction: Accounting for business combination uses two methods, the purchase method and the pooling of interests method, but now all business combinations must use the acquisition method, many companies financial statements will continue to include the effects of previous business combinations.

Requirement 2

The price per share received at the time of issue, assuming that all share were issued.

b.

Expert Solution

Answer to Problem 1.39P

Price per share $8.00

Explanation of Solution

Given Common stock value $70,000

Additional paid in capital $42,000

Number of shares 14,000 shares

Price per share = Total Paid up capitalNumber of Share

Price per share = $70,000 + $42,00014,000 = $8.00

Answer 14

b.

To determine

Introduction: Accounting for business combination uses two methods, the purchase method and the pooling of interests method, but now all business combinations must use the acquisition method, many companies financial statements will continue to include the effects of previous business combinations.

Requirement 2

The price per share received at the time of issue, assuming that all share were issued.

Answer 15

b.

Expert Solution

Answer to Problem 1.39P

Price per share $8.00

Answer 16

b.

Expert Solution

Answer 17

b.

Expert Solution

Answer 18

Expert Solution

Answer 19

Explanation of Solution

Given Common stock value $70,000

Additional paid in capital $42,000

Number of shares 14,000 shares

Price per share = Total Paid up capitalNumber of Share

Price per share = $70,000 + $42,00014,000 = $8.00

Answer 20

c.

To determine

Introduction: Accounting for business combination uses two methods, the purchase method and the pooling of interests method, but now all business combinations must use the acquisition method, many companies financial statements will continue to include the effects of previous business combinations.

Requirement 3

The number of shares P issued at the date of combination

c.

Expert Solution

Answer to Problem 1.39P

Number of shares issued at the date of combination 7,000 shares

Explanation of Solution

Given value of common stock of combined entity $117,000

Common stocks of P before combination $96,000

Number of shares issued at the date of combination=($117,000−$96,000)/$3= 7,000 shares

Answer 21

c.

To determine

Introduction: Accounting for business combination uses two methods, the purchase method and the pooling of interests method, but now all business combinations must use the acquisition method, many companies financial statements will continue to include the effects of previous business combinations.

Requirement 3

The number of shares P issued at the date of combination

Answer 22

c.

Expert Solution

Answer to Problem 1.39P

Number of shares issued at the date of combination 7,000 shares

Answer 23

c.

Expert Solution

Answer 24

c.

Expert Solution

Answer 25

Expert Solution

Answer 26

Explanation of Solution

Given value of common stock of combined entity $117,000

Common stocks of P before combination $96,000

Number of shares issued at the date of combination=($117,000−$96,000)/$3= 7,000 shares

Answer 27

d.

To determine

Introduction: Accounting for business combination uses two methods, the purchase method and the pooling of interests method, but now all business combinations must use the acquisition method, many companies financial statements will continue to include the effects of previous business combinations.

Requirement 4

The amount of cash did P pay as stock issue.

d.

Expert Solution

Answer to Problem 1.39P

The amount of cash P paid $24,000.

Explanation of Solution

Given

P’s cash balance $65,000

S’s cash balance $15,000

Combined cash balance $56,000

Cash paid by P=$65,000+$15,000−$56,000=$24,000

Answer 28

d.

To determine

Introduction: Accounting for business combination uses two methods, the purchase method and the pooling of interests method, but now all business combinations must use the acquisition method, many companies financial statements will continue to include the effects of previous business combinations.

Requirement 4

The amount of cash did P pay as stock issue.

Answer 29

d.

Expert Solution

Answer to Problem 1.39P

The amount of cash P paid $24,000.

Answer 30

d.

Expert Solution

Answer 31

d.

Expert Solution

Answer 32

Expert Solution

Answer 33

Explanation of Solution

Given

P’s cash balance $65,000

S’s cash balance $15,000

Combined cash balance $56,000

Cash paid by P=$65,000+$15,000−$56,000=$24,000

Answer 34

e.

To determine

Introduction: Accounting for business combination uses two methods, the purchase method and the pooling of interests method, but now all business combinations must use the acquisition method, many companies financial statements will continue to include the effects of previous business combinations.

Requirement 5

The market value of P’s shares issued at the date of combination

e.

Expert Solution

Answer to Problem 1.39P

Market value of P’s shares $364,000.

Explanation of Solution

Given Stockholders’ equity of P: Common stock $96,000, Additional paid in capital $234,000

Cash paid by P $24,000

Stockholders’ equity of combined entity: common stock $117,000, Additional paid in capital $553,000

Value of P’s shares at the date of combination: $364,000 =($117,000 + $553,000 + $24,000)–($96,000 + $234,000)

Answer 35

e.

To determine

Introduction: Accounting for business combination uses two methods, the purchase method and the pooling of interests method, but now all business combinations must use the acquisition method, many companies financial statements will continue to include the effects of previous business combinations.

Requirement 5

The market value of P’s shares issued at the date of combination

Answer 36

e.

Expert Solution

Answer to Problem 1.39P

Market value of P’s shares $364,000.

Answer 37

e.

Expert Solution

Answer 38

e.

Expert Solution

Answer 39

Expert Solution

Answer 40

Explanation of Solution

Given Stockholders’ equity of P: Common stock $96,000, Additional paid in capital $234,000

Cash paid by P $24,000

Stockholders’ equity of combined entity: common stock $117,000, Additional paid in capital $553,000

Value of P’s shares at the date of combination: $364,000 =($117,000 + $553,000 + $24,000)–($96,000 + $234,000)

Answer 41

f.

To determine

Introduction: Accounting for business combination uses two methods, the purchase method and the pooling of interests method, but now all business combinations must use the acquisition method, many companies financial statements will continue to include the effects of previous business combinations.

Requirement 6

The fair value of S’s inventory at the date of combination

f.

Expert Solution

Answer to Problem 1.39P

The fair value of S’s inventory $110,000

Explanation of Solution

Given inventory of P before combination $210,000

Inventory of combined entity $320,000

Fair value of inventory: $110,000=$320,000−$210,000

Answer 42

f.

To determine

Introduction: Accounting for business combination uses two methods, the purchase method and the pooling of interests method, but now all business combinations must use the acquisition method, many companies financial statements will continue to include the effects of previous business combinations.

Requirement 6

The fair value of S’s inventory at the date of combination

Answer 43

f.

Expert Solution

Answer to Problem 1.39P

The fair value of S’s inventory $110,000

Answer 44

f.

Expert Solution

Answer 45

f.

Expert Solution

Answer 46

Expert Solution

Answer 47

Explanation of Solution

Given inventory of P before combination $210,000

Inventory of combined entity $320,000

Fair value of inventory: $110,000=$320,000−$210,000

Answer 48

g.

To determine

Introduction: Accounting for business combination uses two methods, the purchase method and the pooling of interests method, but now all business combinations must use the acquisition method, many companies financial statements will continue to include the effects of previous business combinations.

Requirement 7

The fair value of S’s net assets at the date of combination

g.

Expert Solution

Answer to Problem 1.39P

The fair value of S’s net assets $306,000.

Explanation of Solution

Given:

Fair value of assets: Cash $15,000, Accounts receivable $30,000, Inventory $110,000, Building and equipment $293,000. Accounts payable $22,000, Bonds payable $120,000

Fair value of assets: $306,000=($15,000+$30,000+$110,000+$293,000)–($22,000+$120,000)

Answer 49

g.

To determine

Introduction: Accounting for business combination uses two methods, the purchase method and the pooling of interests method, but now all business combinations must use the acquisition method, many companies financial statements will continue to include the effects of previous business combinations.

Requirement 7

The fair value of S’s net assets at the date of combination

Answer 50

g.

Expert Solution

Answer to Problem 1.39P

The fair value of S’s net assets $306,000.

Answer 51

g.

Expert Solution

Answer 52

g.

Expert Solution

Answer 53

Expert Solution

Answer 54

Explanation of Solution

Given:

Fair value of assets: Cash $15,000, Accounts receivable $30,000, Inventory $110,000, Building and equipment $293,000. Accounts payable $22,000, Bonds payable $120,000

Fair value of assets: $306,000=($15,000+$30,000+$110,000+$293,000)–($22,000+$120,000)

Answer 55

h

To determine

Introduction: Accounting for business combination uses two methods, the purchase method and the pooling of interests method, but now all business combinations must use the acquisition method, many companies financial statements will continue to include the effects of previous business combinations.

Requirement 8

The amount of goodwill if any will be reported in combined balance sheet.

h

Expert Solution

Answer to Problem 1.39P

The amount of goodwill $58,000

Explanation of Solution

Fair value of assets: $306,000=($15,000+$30,000+$110,000+$293,000)–($22,000+$120,000)

Market value of shares $364,000

Goodwill: $58,000=$364,000−$306,000

Answer 56

h

To determine

Introduction: Accounting for business combination uses two methods, the purchase method and the pooling of interests method, but now all business combinations must use the acquisition method, many companies financial statements will continue to include the effects of previous business combinations.

Requirement 8

The amount of goodwill if any will be reported in combined balance sheet.

Answer 57

h

Expert Solution

Answer to Problem 1.39P

The amount of goodwill $58,000

Answer 58

h

Expert Solution

Answer 59

h

Expert Solution

Answer 60

Expert Solution

Answer 61

Explanation of Solution

Fair value of assets: $306,000=($15,000+$30,000+$110,000+$293,000)–($22,000+$120,000)

Market value of shares $364,000

Goodwill: $58,000=$364,000−$306,000

Answer 62

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. 1.7Q Ch. 1 - Prob. 1.8Q Ch. 1 - Prob. 1.9Q Ch. 1 - Prob. 1.10Q

Concept explainers

Answer to Problem 1.39P

Explanation of Solution

Answer to Problem 1.39P

Explanation of Solution

Answer to Problem 1.39P

Explanation of Solution

Answer to Problem 1.39P

Explanation of Solution

Answer to Problem 1.39P

Explanation of Solution

Answer to Problem 1.39P

Explanation of Solution

Answer to Problem 1.39P

Explanation of Solution

Answer to Problem 1.39P

Explanation of Solution

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