Ling Corporation decided to acquire all of Huang Corporation's voting common stock on January 1, 2017....

 

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Ling Corporation decided to acquire all of Huang Corporation's voting common stock on January 1, 2017. The purchase price consisted of $10,000 for the registering and issuing of 10,000 shares of Ling Corporation. The market value of the issuance of these shares is $300,000. The purchase price also includes $30,000 for accounting and legal fees. However, Ling is undecided on the additional amount of cash to be paid. Balance sheet information for the companies on December 31, 2016, is summarized as follows (in thousands): Ling Ниаng Book Value Fair Value Book Value Fair Value Assets $1,000 1,000 2,000 1,500 3,000 1,500 $10,000 Cash $1,000 $50 $50 Receivables-net 750 25 50 Inventories 1,500 1,000 2,000 75 100 Land 50 100 Buildings-net Equipment-net Total assets 75 100 1,500 $7.750 15 $350 100 $500 Equities Accounts payable Other liabilities $800 900 S50 $800 1,000 3,000 $50 75 75 Common stock, S10 par Other paid-in capital Retained earnings Total equities 100 1,200 50 1,750 75 $7,750 $350 REQUIRED 1. Prepare journal entries and a balance sheet for Ling Corporation immediately after the acquisition if it decides to include $50,000 of cash in the purchase price. 2. Prepare journal entries and a balance sheet for Ling Corporation immediately after the acquisition if it decides to include $100,000 of cash in the purchase price. Ling Corporation decided to acquire all of Huang Corporation's voting common stock on January 1, 2017. The purchase price consisted of $10,000 for the registering and issuing of 10,000 shares of Ling Corporation. The market value of the issuance of these shares is $300,000. The purchase price also includes $30,000 for accounting and legal fees. However, Ling is undecided on the additional amount of cash to be paid. Balance sheet information for the companies on December 31, 2016, is summarized as follows (in thousands): Ling Ниаng Book Value Fair Value Book Value Fair Value Assets $1,000 1,000 2,000 1,500 3,000 1,500 $10,000 Cash $1,000 $50 $50 Receivables-net 750 25 50 Inventories 1,500 1,000 2,000 75 100 Land 50 100 Buildings-net Equipment-net Total assets 75 100 1,500 $7.750 15 $350 100 $500 Equities Accounts payable Other liabilities $800 900 S50 $800 1,000 3,000 $50 75 75 Common stock, S10 par Other paid-in capital Retained earnings Total equities 100 1,200 50 1,750 75 $7,750 $350 REQUIRED 1. Prepare journal entries and a balance sheet for Ling Corporation immediately after the acquisition if it decides to include $50,000 of cash in the purchase price. 2. Prepare journal entries and a balance sheet for Ling Corporation immediately after the acquisition if it decides to include $100,000 of cash in the purchase price.

Answer rating: 100% (QA)

1 Assume FV is 10 Calculation of the purchase conside... View the full answer