Valuation Presented below are the book values and fair values of the assets and liabilities of Axtel, Inc. and Barcel, Inc. on October 4, 2013, immediately prior to a business combination.

Previously unreported identifiable intangibles, capitalized per GAAP, are:
Axtel, Inc. $75,000
Barcel, Inc. 80,000
Required
a. Prepare the balance sheet of the acquiring firm following each of the following business combinations:
(1) Axtel borrows $250,000 on a long-term basis and buys full ownership of Barcel for $250,000 cash. The transaction is recorded as a statutory merger.
(2) Barcel borrows $505,000 on a long-term basis, and buys full ownership of Axtel for $505,000 cash. The transaction is recorded as a statutory merger.
b. Comment on how the fair value data for Axtel and Barcel were used in each of the above transactions. Why are the two balance sheets different, even though each transaction results in the union of the same two companies?
c. Suppose that a new company, Coppel, Inc., is formed with a nominal investment of $1,000 by Axtel. Coppel's stock is then issued in exchange for the stock of Axtel and Barcel. Axtel stockholders receive 60 percent of the Coppel stock. Prepare the balance sheet of the acquiring firm.

Axtel, Inc. Barcel, Inc. Book Value $50,000 150,000 $200,000 $30,000 Book Value Fair Value Fair Value $ 40,000 $100,000 Property, plant and equipment. 200,000 400,000 $ 25,000 175,000 Total assets . $240,000 70,000 70,000 $30,000 80,000 90,000 60,000 110,000 $200,000 Retained earnings Total liabilities and equity.$240,000