Question: Par Company acquires 100 of the common stock of Sub

Par Company acquires 100% of the common stock of Sub Company for an agreed-upon price of $900,000. The book value of the net assets is $700,000, which includes $50,000 of subsidiary cash equivalents. Existing fixed assets have fair values greater than their recorded book values. How will this transaction affect the cash flow statement of the consolidated firm in the period of the purchase, if:
a. Par Company pays $900,000 cash to purchase the stock?
b. Par Company pays $500,000 cash and signs 5-year notes for $400,000? All Sub Company shareholders receive notes.
c. Par Company exchanges only common stock with the shareholders of Sub Company?

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  • CreatedApril 13, 2015
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