Question
1.Corporation A and Corporation B combine in 2018 in pooling of interest business combination. Which of the following dates is the date of initiation of
1.Corporation A and Corporation B combine in 2018 in pooling of interest business combination. Which of the following dates is the date of initiation of the plan for this business combination?
a.A consulting firm arrangers a meeting between the officers and directors of the two companies on Januarys 5, 2018.
b.A public announcement is made on March 1, 2018 that the exchange ratio will be 1.2 to 1.
c.Stockholders are notified that the officers of the two companies have agreed upon the 1.2 to 1 exchange ratio on March 15, 2018.
d.Stockholders are of the two companies vote to accept the terms of the proposed business combination on May 15, 2018.
2.Expenses related to effecting business combination accounted for by the pooling interests method should be,
a.Deducted in determining the net income of the resulting combined corporation for the period in which the expenses are incurred.
b.Capitalized and amortized over a discretionary period elected by management.
c.Charged to retained earnings when incurred
d.Treated as a prior period adjustment.
Problem:
Allen Corporation initiated a plan to acquire all the voting stock of Lorenzo Glass Company on October 1, 2018. On this date Lorenzo Glass had 200,000 shares of common stock outstanding, 5,000 of which were held by Allen by Allen Corporation.
Between October 1 and December 1 Allen Corporation acquired 4,000 additional shares of Lorenzo Glass and Lorenzo Glass acquired 5,000 shares of Allen Corporation and 10,000 shares of its own stock. These acquisitions were for cash considerations but were not contemplation of effecting the business combination.
The business combination was consummated on December 1, with Allen Corporation issuing 1 share of Allen common for each 2 outstanding shares of Lorenzo Glass.
1.How many shares of Lorenzo Glass stock must be exchanged for common stock of Allen, the issuing corporation, in order for the combination to quality as a pooling of interests with respect to the exchange of shares?
a.200,000 sharesc. 180,000 shares
b.190,000 sharesd. 171,000 shares
2, How many shares of Lorenzo Glass stock will be considered to be exchanged for purposes of determining whether the combination meets the test for a pooling of interests?
a.190,000 sharesc. 176,000 shares
b.178,500 sharesd. 171,000 shares
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