On February 1, Piscina Corporation completed a combination with Swimwear Company accounted for as a pooling of
Question:
Piscina issued 30,000 shares of its common stock with a par value of $25 and a fair value of $150 per share to the owners of Swimwear for all of their Swimwear shares. Upon completion of the combination, Swimwear Company was formally dissolved.
Prior to 2002, business combinations were accounted for using either purchase or pooling of interests accounting. The two methods often produced substantially different financial statement effects. For the scenario above,
a. What are the respective consolidated values for Swimwears assets under the pooling method and the purchase method?
b. Under each of the following methods, how would Piscina account for Swimwears current year, but prior to acquisition, revenues and expenses?
¢ Pooling of interests method
¢ Purchase method
c. Explain the alternative impact of pooling versus purchase accounting on performance ratios such as return on assets and earnings per share in periods subsequent to thecombination.
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
Step by Step Answer:
Advanced Accounting
ISBN: 9781260247824
14th Edition
Authors: Joe Ben Hoyle, Thomas Schaefer, Timothy Doupnik