Question text

Asset acquisition vs. stock acquisition (fair value is different from book value) The following financial statement information is for an investor company and an investee company on January 1, 2013. On January 1, 2013, the investor companys common stock had a traded market value of $35 per share, and the investee companys common stock had a traded market value of $31 per share.

	Book Values		Fair Values
	Investor	Investee	Investor	Investee
Receivables & inventories	$100,000	$50,000	$90,000	$45,000
Land	200,000	100,000	300,000	150,000
Property & equipment	225,000	100,000	250,000	130,000
Trademarks & patents			150,000	80,000
Total assets	$525,000	$250,000	$790,000	$405,000
Liabilities	$150,000	$80,000	$180,000	$95,000
Common stock ($1 par)	20,000	10,000
Additional paid-in capital	280,000	150,000
Retained earnings	75,000	10,000
Total liabilities & equity	$525,000	$250,000
Net assets	$375,000	$170,000	$610,000	$310,000

Required (Parts a. and b. are independent of each other.) a. Assume that the investor company issued 9,500 new shares of the investor companys common stock in exchange for all of the individually identifiable assets and liabilities of the investee company. The financial information presented, above, was prepared immediately before this transaction. Provide the Investor Companys balances (i.e., on the investors books, before consolidation) for the following accounts immediately following the acquisition of the investees net assets:

Receivables & Inventories	Answer
Land	Answer
Property & Equipment	Answer
Trademarks & Patents	Answer
Investment in Investee	Answer
Goodwill	Answer
Total Assets	Answer
Liabilities	Answer
Common Stock ($1 par)	Answer
Additional Paid-In Capital	Answer
Retained Earnings	Answer
Total Liabilities and Equity	Answer

b. Assume that the investor company issued 9,500 new shares of the investor companys common stock in exchange for all of the investee companys common stock. The financial information presented, above, was prepared immediately before this transaction. Provide the Investor Companys balances (i.e., on the investors books, before consolidation) for the following accounts immediately following the acquisition of the investees net assets:

Receivables & Inventories	Answer
Land	Answer
Property & Equipment	Answer
Trademarks & Patents	Answer
Investment in Investee	Answer
Goodwill	Answer
Total Assets	Answer
Liabilities	Answer
Common Stock ($1 par)	Answer
Additional Paid-In Capital	Answer
Retained Earnings	Answer
Total Liabilities and Equity	Answer