Pool Inc. and Spartin Ltd. are both public companies. The common shares of Pool have been selling in a range of $ 30 to $ 43 per share over the past year. Spartin€™s common shares have been selling at between $ 18 and $ 23.
The two companies are in related lines of business. In view of the increasing exposure of the companies to world competition arising from the reduction in tariff barriers, the boards of directors have approved an agreement in principle to combine the two business-es. The boards have also agreed that the combination should take the form of a share exchange, with one share of Pool equivalent to two shares of Spartin in the exchange. On the date of acquisition each share of Pool was worth $ 33 while each share of Spartin was worth $ 20.
The manner of executing the combination has not yet been decided. Three possibilities are under consideration:
1. Pool could issue one new share in exchange for two of Spartin€™s shares.
2. Spartin could issue two new shares in exchange for each of Pool€™s shares.
3. A new corporation could be formed, PS Enterprises Inc., which would issue one share in exchange for each share of Spartin and two shares in exchange for each share of Pool.
The directors are uncertain as to the accounting implications of the three alternatives. They believe that the fair values of the assets and liabilities of both companies are approximately equal to their carrying values. They have asked you to prepare a report in which you explain how the accounting results would differ under the three share exchange alternatives. They have provided you with the condensed statements of financial position of both companies as shown in Exhibit A. Pool Inc. currently has 1,600,000 common shares outstanding, and Spartin Ltd. has 1,200,000 shares outstanding.

Required
Prepare the report requested by the boards ofdirectors.

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Exhibit A Condensed Statements of Financial Position Pool Inc 7000,000 63,000,000 $70,000,000 6,000,000 14,000,000 17,000,000 Spartin Ltd. 4,500,000 22500,000 27,000,000 1,500,000 5,500,000 16,000,000 4,000,000 27,000,000 Current assets Capital assets Current liabilities Long-term debt Common shares Retained earnings 33期, $70,000,000