Problem 1-2
On December 31 Jose SA acquired Carlos SA by issuing 200,000
common shares with a par value of 10 $. The market value for these
shares was $ 10,000,000 at the date of acquisition. Below is the balance
sheet for Jose SA and Carlos SA immediately before the acquisition (in
000):
JOSE BV JOSE FV CARLOS BV CARLOS FV
Cash 2,000 2,000 1,000 1,000
Other current assets 13,000 20,000 8,000 12,000
Plant assets 15,000 20,000 10,000 13,000
Current liabilities 5,000 4,000 2,000 4,000
Other liabilities 12,000 12,000 8,000 13,000
Common stock 10,000 5,000
Retained earnings 3,000 4,000
Prepare the balance sheet immediately after the acquisition and dissolving
Carlos SA
Solution:
Investment in Carlos SA 10,000
Common stock 2,000
Additional paid in capital 8,000
Cash 1,000
Other current assets 12,000
Plant assets 13,000
Goodwill 1,000
Current liabilities 4,000
Other liabilities 13,000
Investment in Carlos SA 10,000
ASSETS L & OE
Cash 3,000 Current 9,000
liabilities
Other current 25,000 Other liabilities 25,000
assets
Plant assets 28,000 Common stock 12,000
Goodwill 1,000 Additional paid- 8,000
in capital
Retained 3,000
earnings
TOTAL 57,000 TOTAL 57,000
Problem 1-3
On 1/1/2016, Pam issues $ 10 par value of its common stock for all of
Sun's shares , and dissolves Sun. Pam pays $ 40,000 registration fees and
$ 60,000 other combination costs. The market price of Pam's shares is $
60 each. Just before the combination, both companies had the following
information:
Pam BV Sun BV Sun FV
Cash 240 20 20
Inventories 100 60 120
Other current assets 200 180 200
Land 160 40 200
Property, plant and equipment 1,300 400 700
(net)
TOTAL 2,000 700 1,240
Liabilities 400 100 100
Capital stock 1,000 200
Additional paid-in capital 400 100
Retained earnings 200 300
TOTAL 2,000 700
Required: For the two following independent cases, prepare the necessary
journal entries and the balance sheet immediately after that.
a- Pam issues 25000 shares
Investment in Sun 1,500
Capital stock 250
Additional paid-in capital 1,250
Additional paid-in capital 40
Investment expense 60
Cash 100
Cash 20
Inventories 120
Other current assets 200
Land 200
Property, plant, and equipment 700
Goodwill 360
Liabilities 100
Investment in Sun 1,500
ASSETS L & OE
Cash 160 Liabilities 500
Inventories 220 Capital stock 1,250
Other current 400 Additional paid 1,610
assets in capital
Land 360 Retained 140
earnings
PPE 2,000
Goodwill 360
TOTAL 3,500 TOTAL 3,500
a- Pam issues 15000 shares
Investment in Sun 900
Capital stock 150
Additional paid-in capital 750
Additional paid-in capital 40
Investment expense 60
Cash 100
Cash 20
Inventories 120
Other current assets 200
Land 200
Property, plant, and equipment 700
Liabilities 100
Investment in Sun 900
Gain on bargain purchase 240
ASSETS L & OE
Cash 160 Liabilities 500
Inventories 220 Capital stock 1,150
Other current 400 Additional paid 1,110
assets in capital
Land 360 Retained 380
earnings
PPE 2,000
TOTAL 3,140 TOTAL 3,140
