Sugar Corp and Syrup Limited have reached an agreement in principle to combine their operations as of October 1, 20X9. However, the board of directors cannot decide on the best way to accomplish the combination. Below are the alternatives being considered.
1. Sugar acquires the net assets of Syrup for $1,700,000 cash.
2. Sugar acquires only the assets for $2,650,000 cash.
3. Sugar acquires all of the outstanding shares of Syrup by issuing shares with a fair market value of $1,700,000.
Syrup has the following assets and liabilities at October 1, 20X9 (in thousands of dollars).

\begin{array} { | l | r | } \hline & \$ \\\hline \text { Cash } & 50 \\\hline \text { Accounts receivable } & 230 \\\hline \text { Inventory } & 470 \\\hline \text { Property, plant, and equipment, net } & \underline { 1,750 } \\\hline \text { Total assets } & \underline { 2,500 } \\\hline & \\\hline & \\\hline \text { Accounts payable } & 360 \\\hline \text { Loan payable } & 650 \\\hline \text { Common shares } & 800 \\\hline \text { Retained earnings } & \underline { 690 } \\\hline \text { Total liabilities and shareholders' equity } & \underline { 2,500 } \\\hline\end{array}

The only item that has a fair value different from its carrying value is the property, plant, and equipment, which has a fair value of $1,900.
Required:
Explain how each transaction is different from the acquirer's point of view. Prepare the journal entry that would be recorded by Sugar for each these alternatives.

There Are a Number of Possible Approaches to Reporting Consolidated

Multiple Choice

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