Consider the following balance sheets ($ in millions): Company A paid $90 million to Company B stockholders
Question:
Consider the following balance sheets ($ in millions):
Company A paid $90 million to Company B stockholders for all their stock. The “fair value†of the plant assets of Company B is $40 million. The fair value of cash and inventories is equal to their carrying amounts. Companies A and B continued to keep separate books.
1. Prepare a tabulation showing the balance sheets of companies A and B, intercompany eliminations, and the consolidated balance sheet immediately after the acquisition.
2. Suppose that $50 million instead of $40 million of the total purchase price of $90 million could logically be assigned to the plant assets. How would the consolidated accounts be affected?
3. Refer to the facts in requirement 2. Suppose Company A had paid $100 million instead of $90 million. State how your tabulation in requirement 2 wouldchange.
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
Step by Step Answer:
Introduction to Financial Accounting
ISBN: 978-0133251036
11th edition
Authors: Charles Horngren, Gary Sundem, John Elliott, Donna Philbrick