On January 1, 20X1, Palpha Corporation acquired all of Stravo Companys assets and liabilities by issuing shares
Question:
On January 1, 20X1, Palpha Corporation acquired all of Stravo Company’s assets and liabilities by issuing shares of its $3 par value stock to the owners of Stravo Company in a business combination.
Palpha also made a cash payment for stock issue costs. Partial balance sheet data for Palpha and Stravo, before the cash payment and issuance of shares, and a combined balance sheet following the business combination are as follows:
Required
a. What number of its $5 par value shares did Stravo have outstanding at January 1, 20X1?
b. Assuming that all of Stravo’s shares were issued when the company was started, what was the price per share received at the time of issue?
c. How many shares of Palpha were issued at the date of combination?
d. What amount of cash did Palpha pay as stock issue costs?
e. What was the total market value of Palpha’s shares issued at the date of combination?
f. What was the fair value of Stravo’s inventory at the date of combination?
g. What was the fair value of Stravo’s net assets at the date of combination?
h. What amount of goodwill, if any, will be reported in the combined balance sheet following the combination?
Step by Step Answer:
Advanced Financial Accounting
ISBN: 9781265042615
13th International Edition
Authors: Theodore E. Christensen, David M. Cottrell, Cassy Budd