Exercise CFS$\_1-$ Business Combination: Net Assets for Cash & Stocks for Cash

As of Dec. $31,20$X$0,$ immediately before the close of the fiscal year, the following information is known

concerning three formally separate companies.

Note that "Donald Duc Inc." owns $100$ percent of the shares of "Louise Inc." which are recorded in its balance

sheet $"$at cost$".$

Note also that of the individually identifiable net assets belonging to "Louise Inc." both book and fair values

are provided.

Uncle Scrooge Inc.

Donald Duck Inc.

Louie Inc. $($@ fair value of identifiable net assets$)$

Starting from this data, consider alternately the following three assumptions.

$($a$)$ "Uncle Scrooge Inc." buys from "Louie Inc." all the net assets that make up his entire company by

paying for them a total amount of $680,000.$ The consideration is paid in cash.

$($b$)$ "Uncle Scrooge Inc." buys from "Donald Duck Inc." the entire package of shares in "Louie Inc." that

the latter owns by paying for it a total amount of $$ f $680,000.$ The consideration is paid in cash.

Required:

For each of the two hypothesis the candidate provides:

The journal entries of both the buyer and the seller.

The financial statements of both the buyer and the seller after the purchase transaction is

finalized.