EBK STRATEGIC MANAGEMENT: CONCEPTS
EBK STRATEGIC MANAGEMENT: CONCEPTS
4th Edition
ISBN: 8220106797259
Author: Rothaermel
Publisher: YUZU
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Chapter 3.5, Problem 2CC
Summary Introduction

Case summary:

The case deals with the development of Company A. Company A is founded by Person C and Person G, who were roommates and industrial designers. They initiated renting their room to fellow designers to make some money, which gives the idea to initiate a business. Person C and Person G started a website in 2008 along with Person B, who is a computer scientist. The website helps the host and guest to meet and transact.

In 2017, the value of the firm is $31 billion. Company A became the fourth most valuable private company on the planet. Even though they are the fourth most valuable company, they are not in smooth sailing. There were issues with PESTEL factors. Especially the regulation of State N was the issue for Company A.

To determine: The way an internet startup able to disrupt the hotel industry, which is dominated by Company M and Company H.

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EXERCISE 3-5     Treasury Stock Held by Subsidiary LO 8Pool Company purchased 90% of the outstanding common stock of Spruce Company on December31, 2019, for cash. At that time the balance sheet of Spruce Company was as follows:Current assets $1,050,000Plant and equipment 990,000Land 170,000Total assets $2,210,000Liabilities $ 820,000Common stock, $20 par value 900,000Other contributed capital 440,000Retained earnings 150,000Total 2,310,000Less treasury stock at cost, 5,000 shares 100,000Total equities $2,210,000Required:Prepare the elimination entry required for the preparation of a consolidated balance sheet workpaper on December 31, 2019, assuming:(1) The purchase price of the stock was $1,400,000. Assume that any difference between thebook value of net assets and the value implied by the purchase price relates to subsidiary land.(2) The purchase price of the stock was $1,160,000. Assume that the subsidiary land has a fairvalue of $180,000, and the other assets and liabilities are…
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