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Elm Corporation and Maple Company have announced terms of an exchange agreement under which Elm will issue 8,000 shares of its $10 par value common stock to acquire all of Maple Company’s assets
Elm Corporation and Maple Company have announced terms of an exchange agreement under which Elm will issue 8,000 shares of its $10 par value common stock to acquire all of Maple Company’s assets. Elm shares currently are trading at $50, and Maple $5 par value shares are trading at $18 each. Historical cost and fair value balance sheet data on January 1, 20X2, are as follows:
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Elm Corporation |
|
Maple Company |
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||||
|
Balance Sheet Item |
Book Value |
Fair Value |
|
Book Value |
Fair Value |
|
||
|
Cash & Receivables |
$150,000 |
$150,000 |
$40,000 |
$40,000 |
|
|||
|
Land |
100,000 |
170,000 |
50,000 |
85,000 |
|
|||
|
Buildings & Equipment (net) |
300,000 |
400,000 |
160,000 |
230,000 |
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|||
|
Total Assets |
$550,000 |
$720,000 |
$250,000 |
$ 355,000 |
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|
|
|
|||||||
|
Common Stock |
$200,000 |
$100,000 |
|
|||||
|
Additional Paid-In Capital |
20,000 |
10,000 |
|
|||||
|
Retained Earnings |
330,000 |
140,000 |
|
|||||
|
Total Equities |
$550,000 |
$250,000 |
|
|||||
|
|
|
|
|
|
|
|
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What amount will be reported immediately following the business combination for each of the following items in the combined company’s balance sheet?
Expert Solution
Elm Corporation and Maple Company have announced terms of an exchange agreement under which Elm will issue 8,000 shares of its $10 par value common stock to acquire all of Maple Company’s assets. Elm shares currently are trading at $50, and Maple $5 par value shares are trading at $18 each. Historical cost and fair value balance sheet data on January 1, 20X2, are as follows:
|
|
Elm Corporation |
|
Maple Company |
|
||||
|
Balance Sheet Item |
Book Value |
Fair Value |
|
Book Value |
Fair Value |
|
||
|
Cash & Receivables |
$150,000 |
$150,000 |
$40,000 |
$40,000 |
|
|||
|
Land |
100,000 |
170,000 |
50,000 |
85,000 |
|
|||
|
Buildings & Equipment (net) |
300,000 |
400,000 |
160,000 |
230,000 |
|
|||
|
Total Assets |
$550,000 |
$720,000 |
$250,000 |
$ 355,000 |
|
|||
|
|
|
|||||||
|
Common Stock |
$200,000 |
$100,000 |
|
|||||
|
Additional Paid-In Capital |
20,000 |
10,000 |
|
|||||
|
Retained Earnings |
330,000 |
140,000 |
|
|||||
|
Total Equities |
$550,000 |
$250,000 |
|
|||||
|
|
|
|
|
|
|
|
|
|
What amount will be reported immediately following the business combination for each of the following items in the combined company’s balance sheet?
Answer:
- Common Stock - $280,000
- Cash and Receivables - $190,000
- Land - $185,000
- Buildings and Equipment - $530,000
- Goodwill - $45,000
- Additional Paid-In Capital - $340,000
- Retained Earnings - $330,000
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