Strategic Management 4e
Strategic Management 4e
4th Edition
ISBN: 9781260779646
Author: Frank T. Rothaermel
Publisher: Mc graw hill
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Chapter 4.5, Problem 2CC
Summary Introduction

Case summary:

Many are convinced that Company AE purchased the Company BE for gaining a stronger position in the industry of music. Many critics argue that Company AE needs someone with a creative vision. Company AE links Company BE with the top talents of today. Company AE hired the former CEO of Company AA to spearhead the retail operations.

To explain: If person X agrees with the assessment.

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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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