110. Salem Co. had the following account balances as of December 1, 2010:
Bellington Inc. transferred $1.7 million in cash and 12,000 shares of its newly
issued $30 par value common stock (valued at $90 per share) to acquire all of
Salem’s outstanding common stock.
Determine the balance for Goodwill that would be included in a December 1,
2010, consolidation.
111. Salem Co. had the following account balances as of December 1, 2010:
Bellington Inc. transferred $1.7 million in cash and 12,000 shares of its newly
issued $30 par value common stock (valued at $90 per share) to acquire all of
Salem’s outstanding common stock.
Assume that Bellington paid cash of $2.8 million. No stock is issued. An
additional $50,000 is paid in direct combination costs.
Required:
For Goodwill, determine what balance would be included in a December 1, 2010
consolidation.
112. On January 1, 2011, Chester Inc. acquired 100% of Festus Corp.’s
outstanding common stock by exchanging 37,500 shares of Chester’s $2 par
value common voting stock. On January 1, 2011, Chester’s voting common stock
had a fair value of $40 per share. Festus’ voting common shares were selling for
$6.50 per share. Festus’ balances on the acquisition date, just prior to acquisition
are listed below.
Required:
Compute the value of the Goodwill account on the date of acquisition, 1/1/11.
113. The financial statements for Jode Inc. and Lakely Corp., just prior to their
combination, for the year ending December 31, 2010, follow. Lakely’s buildings
were undervalued on its financial records by $60,000.
114. The financial statements for Jode Inc. and Lakely Corp., just prior to their
combination, for the year ending December 31, 2010, follow. Lakely’s buildings
were undervalued on its financial records by $60,000.
On December 31, 2010, Jode issued 54,000 new shares of its $10 par value stock
in exchange for all the outstanding shares of Lakely. Jode’s shares had a fair
value on that date of $35 per share. Jode paid $34,000 to an investment bank for
assisting in the arrangements. Jode also paid $24,000 in stock issuance costs to
effect the acquisition of Lakely. Lakely will retain its incorporation.
Required:
Determine consolidated net income for the year ended December 31, 2010.
115. The financial statements for Jode Inc. and Lakely Corp., just prior to their
combination, for the year ending December 31, 2010, follow. Lakely’s buildings
were undervalued on its financial records by $60,000.
116. The following are preliminary financial statements for Black Co. and Blue
Co. for the year ending December 31, 20X1.
On December 31, 20X1 (subsequent to the preceding statements), Black
exchanged 10,000 shares of its $10 par value common stock for all of the
outstanding shares of Blue. Black’s stock on that date has a fair value of $50 per
share. Black was willing to issue 10,000 shares of stock because Blue’s land was
appraised at $204,000. Black also paid $14,000 to several attorneys and
accountants who assisted in creating this combination.
Required:
Assuming that these two companies retained their separate legal identities,
prepare a consolidation worksheet as of December 31, 20X1 assuming the
transaction is treated as a purchase combination.
117. The following are preliminary financial statements for Black Co. and Blue
Co. for the year ending December 31, 20X1 prior to Black’s acquisition of Blue.
On December 31, 20X1 (subsequent to the preceding statements), Black
exchanged 10,000 shares of its $10 par value common stock for all of the
outstanding shares of Blue. Black’s stock on that date has a fair value of $60 per
share. Black was willing to issue 10,000 shares of stock because Blue’s land was
appraised at $204,000. Black also paid $14,000 to several attorneys and
accountants who assisted in creating this combination.
Required:
Assuming that these two companies retained their separate legal identities,
prepare a consolidation worksheet as of December 31, 20X1 after the acquisition
transaction is completed.
118. For each of the following situations, select the best letter answer to reflect
the effect of the numbered item on the acquirer’s accounting entry at the date of
combination when separate incorporation will be maintained. Items (4) and (6)
require two selections.
(A) Increase Investment account.
(B) Decrease Investment account.
(C) Increase Liabilities.
(D) Increase Common stock.
(E) Decrease common stock.
(F) Increase Additional paid-in capital.
(G) Decrease Additional paid-in capital.
(H) Increase Retained earnings
(I) Decrease Retained earnings
_____1. Direct costs.
_____2. Indirect costs.
_____3. Stock issue costs.
_____4. Contingent consideration.
_____5. Bargain purchase.
_____6. In-process research and development acquired.
