Exam 1: Business Combinations

Picasso Co.issued 5,000 shares of its $1 par common stock,valued at $100,000,to acquire shares of Seurat Company in an all-stock transaction.Picasso paid the investment bankers $35,000 and will treat the investment banker fee as

Bigga Corporation purchased the net assets of Petit,Inc.on January 2,2013 for $380,000 cash and also paid $15,000 in direct acquisition costs.Petit,Inc.was dissolved on the date of the acquisition.Petit's balance sheet on January 2,2013 was as follows: Fair values agree with book values except for inventory,land,and equipment,which have fair values of $260,000,$35,000 and $35,000,respectively.Petit has patent rights with a fair value of $20,000. Required: Prepare Bigga's general journal entry for the cash purchase of Petit's net assets.

Samantha's Sporting Goods had net assets consisting of the following: Book Value Fair Value Cash \ 150,000 \ 150,000 Inventory 820,000 960,000 Building and Fixtures 330,000 310,000 Liabilities (90,000) (88,000) Pedic Incorporated purchased Samantha's Sporting Goods,and immediately dissolved Samantha's as a separate legal entity. Requirement 1: If Samantha's was purchased for $1,000,000 cash,prepare the entry recorded by Pedic. Requirement 2: If Samantha's was purchased for $1,500,000 cash,prepare the entry recorded by Pedic.

For intangibles to be recognizable they must meet both a separability criterion and a contractual-legal criterion.

A merger occurs when one corporation takes over all the operations of another business entity,and that entity is dissolved.

On December 31,2013,Peris Company acquired Shanta Company's outstanding stock by paying $400,000 cash and issuing 10,000 shares of its own $30 par value common stock,when the market price was $32 per share.Peris paid legal and accounting fees amounting to $35,000 in addition to stock issuance costs of $8,000.Shanta is dissolved on the date of the acquisition.Balance sheet information for Peris and Shanta immediately preceding the acquisition is shown below,including fair values for Shanta's assets and liabilities. Required: Determine the consolidated balances which Peris would present on their consolidated balance sheet for the following accounts. Cash Inventory Construction Permits Goodwill Notes Payable Common Stock Additional Paid in Capital Retained Earnings

In reference to the FASB disclosure requirements about a business combination in the period in which the combination occurs,which of the following is correct?

When considering an acquisition,which of the following is NOT a method by which one company may gain control of another company?

Use the following information to answer the question(s) below. Polka Corporation exchanges 100,000 shares of newly issued $1 par value common stock with a fair market value of $20 per share for all of the outstanding $5 par value common stock of Spot Inc. and Spot is then dissolved. Polka paid the following costs and expenses related to the business combination: Costs of special shareholders' meeting to vote on the merger \ 12,000 Registering and issuing securities 10,000 Accounting and legal fees 18,000 Salaries of Polka's employees assigned to the implementation of the merger 27,000 Cost of closing duplicate facilities 13,000 -In the business combination of Polka and Spot,

Historically,much of the controversy concerning accounting requirements for business combinations involved the ________ method.

Durer Inc.acquired Sea Corporation in a business combination and Sea Corp.went out of existence.Sea Corp.developed a patent listed as an asset on Sea Corp.'s books at the patent office filing cost.In recording the combination,

On January 2,2013 Carolina Clothing issued 100,000 new shares of its $5 par value common stock valued at $19 a share for all of Dakota Dressing Company's outstanding common shares in an acquisition.Carolina paid $15,000 for registering and issuing securities and $10,000 for other direct costs of the business combination.The fair value and book value of Dakota's identifiable assets and liabilities were the same.Assume Dakota Company is dissolved on the date of the acquisition.Summarized balance sheet information for both companies just before the acquisition on January 2,2013 is as follows: Required: Prepare a balance sheet for Carolina Clothing immediately after the business combination.

According to ASC 810-10,liabilities assumed in an acquisition will be valued at the ________.

The first step in recording an acquisition is to determine the fair values of all identifiable tangible and intangible assets acquired and actual value of liabilities assumed in the combination.

On January 2,2013 Piron Corporation issued 100,000 new shares of its $5 par value common stock valued at $19 a share for all of Seana Corporation's outstanding common shares.Piron paid $15,000 to register and issue shares.Piron also paid $20,000 for the direct combination costs of the accountants.The fair value and book value of Seana's identifiable assets and liabilities were the same.Summarized balance sheet information for both companies just before the acquisition on January 2,2013 is as follows: Required: 1.Prepare Piron's general journal entry for the acquisition of Seana,assuming that Seana survives as a separate legal entity. 2.Prepare Piron's general journal entry for the acquisition of Seana,assuming that Seana will dissolve as a separate legal entity.

In reference to international accounting for goodwill,U.S.companies have complained that past U.S.accounting rules for goodwill placed them at a disadvantage in competing against foreign companies for merger partners.Why?

In a business combination,which of the following will occur?

In August 1999,the Financial Accounting Standards Board issued a report supporting its proposed decision to eliminate the pooling of interests method to account for business combinations.

On June 30,2013,Stampol Company ceased operations and all of their assets and liabilities were purchased by Postoli Incorporated.Postoli paid $40,000 in cash to the owner of Stampol,and signed a five-year note payable to the owners of Stampol in the amount of $200,000.Their closing balance sheets as of June 30,2013 are shown below.In the purchase agreement,both parties noted that Inventory was undervalued on the books by $10,000,and Pistoli would also take possession of a customer list with a fair value of $18,000.Pistoli paid all legal costs of the acquisition,which amounted to $7,000. Required: 1.Prepare the journal entry Postoli would record at the date of acquisition. 2.Prepare the journal entry Stampol would record at the date of acquisition.

On January 2,2013 Palta Company issued 80,000 new shares of its $5 par value common stock valued at $12 a share for all of Sudina Corporation's outstanding common shares.Palta paid $5,000 for the direct combination costs of the accountants.Palta paid $18,000 to register and issue shares.The fair value and book value of Sudina's identifiable assets and liabilities were the same.Summarized balance sheet information for both companies just before the acquisition on January 2,2013 is as follows: Required: 1.Prepare Palta's general journal entry for the acquisition of Sudina assuming that Sudina survives as a separate legal entity. 2.Prepare Palta's general journal entry for the acquisition of Sudina assuming that Sudina will dissolve as a separate legal entity.