Loose Leaf for Foundations of Financial Management Format: Loose-leaf
17th Edition
ISBN: 9781260464924
Author: BLOCK
Publisher: Mcgraw Hill Publishers
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Chapter 1, Problem 15DQ
Summary Introduction
To explain:The way that the Sarbanes-Oxley Act of 2002 impacts the financial reporting of a corporation.
Introduction:
Sarbanes-Oxley Act, 2002:
Sarbanes-Oxley Act, 2002 is an act under which a board of five members is constituted. Undertaking the responsibility of maintaining the quality of audits, establishing standards of audits, and setting up rules and regulations for the independence of the auditors are some of the roles of this board. The main focus of this act is to ensure that publicly-listed companies fairly present actual reports of their financial statements.
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Assume that the following statements of financial position are stated and a book value.
Alpha Corporation
Current Assets
$15,000
Current Liabilities
$5,400
Net Fixed Assets
39,000
Long-Term Debt
10,100
Equity
38,500
$54,000
$54,000
Beta Corporation
Current Assets
$3,600
Current Liabilities
$1,400
Net Fixed Assets
6,700
Long-Term Debt
2,100
Equity
6,800
$10,300
$10,300
Suppose the fair market value of Beta’s fixed assets is $9,500 rather than the $6,700 book value shown. Alpha pays $17,300 for Beta and raises the needed funds through an issue of long-term debt. Construct the post-merger statement of financial position now, assuming that the purchase method of accounting is used.
Chapter 1 Solutions
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