Ace Corporation acquired Blue Corporation on August 31,2016. Both corporations have fiscal years ending on August 31,Exibit 3.9 shows the SFP for each corporation as of August 31,2016, immediately prior tothe combination , and net income amounts for each corporation for the fiscal year ended August 31,2016. The fair values of the asset and liabilities of the two companies at the date of acquisition. The deferred development costs represent the unamortized balance of the development costs of the companies' leading-edge products. There is no observable market value for this identifiable intangible asset, but Ace expects to fully recover the costs in future years. Before the combination, Ace had 1,200,000 common shares issued and outstanding. Blue had 750,000 common shares issued and outstanding.

Required

Prepare the Ace Corporation post- combination SFP (Statement of Financial position) under each of the following independent situations:

a.Ace Corporation purchased the assets and assumed the liabilities of Blue corporation by paying $2,000,000 cash and issuing long-term instalment notes payable of $18,000,000

Pre-combination Statements of Financial Position , August 31,2016

AceBlue

Cash and cash equivalents $2,350,000 $1,200,000

Account receivable 2,000,0001,800,000

Land5,000,000---------

Machinery and equipment(net) 13,500,0008,400,000

Deferred development costs 600,0003,100,000

$23,450,000$14,500,000

Accounts payable $650,000$1,100,000

Notes payable, long term 2,000,0001,000,000

Common shares15,000,0006,950,000

Retained earnings5,800,0005,450,000

$23,450,000$14,500,000

Net income, year ended August 31,2016 $2,450,000$1,300,000

Fair values, August 31,2016

AceBlue

Cash and cash equivalents $2,350,000$1,200,000

Account receivable 2,000,0001,800,000

Land8,500,000---------

Machinery and equipment(net) 11,000,00011,000,000

Deferred development costs750,0004,000,000

Accounts payable(650,000)(1,100,000)

Notes payable, long term (2,000,000 )(900,000)

Net asset fair value $21,950,000$16,000,000

b.Ace issued 400,000 common shares for all of the outstanding common shares of Blue. The market value of Ace's shares was $50 per share.

c.Ace purchased 100% of Blue's outstanding common shares from Blue's previous shareholders. As consideration, Ace issued 270,000 common shares and paid $1,000,000 in cash. The market value of Ace's shares was $50 per share.