Exam 1: Business Combinations

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.

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: -Which of the following methods does the FASB consider the best indicator of fair values in the evaluation of goodwill impairment?

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: -Pepper Company paid $2,500,000 for the net assets of Salt Corporation and Salt was then dissolved. Salt had no liabilities. The fair values of Salt's assets were $3,750,000. Salt's only non-current assets were land and buildings with book values of $100,000 and $520,000, respectively, and fair values of $180,000 and $730,000, respectively. At what value will the buildings be recorded by Pepper?

The balance sheets of Palisade Company and Salisbury Corporation were as follows on December 31, 2013: On January 1, 2014 Palisade issued 30,000 of its shares with a market value of $40 per share in exchange for all of Salisbury's shares, and Salisbury was dissolved. Palisade paid $20,000 to register and issue the new common shares. It cost Palisade $50,000 in direct combination costs. Book values equal market values except that Salisbury's land is worth $250,000. Required: Prepare a Palisade balance sheet after the business combination on January 1, 2014.

Samantha's Sporting Goods had net assets consisting of the following: 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.

With respect to goodwill, an impairment

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.

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: -According to FASB Statement No. 141, liabilities assumed in an acquisition will be valued at the ________.

Under the provisions of FASB Statement No. 141R, in a business combination, when the fair value of identifiable net assets acquired exceeds the investment cost, which of the following statements is correct?

Parrot Incorporated purchased the assets and liabilities of Sparrow Company at the close of business on December 31, 2013. Parrot borrowed $2,000,000 to complete this transaction, in addition to the $640,000 cash that they paid directly. The fair value and book value of Sparrow's recorded assets and liabilities as of the date of acquisition are listed below. In addition, Sparrow had a patent that had a fair value of $50,000. Required: 1. Prepare Parrot's general journal entry for the acquisition of Sparrow, assuming that Sparrow survives as a separate legal entity. 2. Prepare Parrot's general journal entry for the acquisition of Sparrow, assuming that Sparrow will dissolve as a separate legal entity.

Balance sheet information for Sphinx Company at January 1, 2013, is summarized as follows:

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

Pony acquired Spur Corporation's assets and liabilities for $500,000 cash on December 31, 2013. Spur dissolved on the date of the acquisition. Spur's balance sheet and related fair values are shown as of that date, below. Required: Prepare the journal entry recorded by Pony as a result of this transaction.

According to FASB Statement 141R, which one of the following items may not be accounted for as an intangible asset apart from goodwill?

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: -In the business combination of Polka and Spot,

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,

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: -Under the current GAAP, Goodwill arising from a business combination is

Which of the following is not a reason for a company to expand through a combination, rather than by building new facilities?

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

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: -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?