Question

Wood Company and Willie Inc. form a joint venture—Woodlie Partners—to manufacture and distribute agricultural pesticides. Wood and Willie each contribute $20 million cash and receive 50% of Woodlie’s common stock. Woodlie then borrows $200 million from a consortium of banks and uses the money to build its manufacturing and distribution facilities. The loan is made on December 31, 2014, and is fully guaranteed by both Wood and Willie.

Required:
How much of the $200 million debt shows up on the December 31, 2014, balance sheet of Wood Company? Why? Would the same be true for Willie Inc.? Why or why not?



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  • CreatedSeptember 10, 2014
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