Answered step by step
Verified Expert Solution
Question
1 Approved Answer
( b ) Assume that Red issued 1 2 1 , 0 0 0 common shares, with a market value of $ 8 per share
b Assume that Red issued common shares, with a market value of $ per share to the shareholders of Sax for of their
shares. Legal fees associated with issuing these shares amounted to $ and were paid in cash. Red is identified as the acquirer.
i Prepare the journal entries in the records of Red to record the share acquisition and related fees. If no entry is required for a
transactionevent select No Journal Entry Required" in the first account field.The July Year balance sheets of two companies that are parties to a business combination are as follows:
In addition to the property, plant, and equipment identified above, Red Corp. attributed a value of $ to Sax's assembled
workforce. They have the knowledge and skill to operate Sax's manufacturing facility and are essential to the success of the operation.
Although the eight manufacturing employees are not under any employment contracts, management of Red was willing to pay
$ as part of the purchase price on the belief that most or all of these employees would continue to work for the company.
Effective on August Year the shareholders of Sax accepted an offer from Red Corporation to purchase all of their common shares.
Red's costs for investigating and drawing up the share purchase agreement amounted to $ A Record the acquisition of shares from Sax for $
B Record the $ cash paid for professional fees
expense and $ paid for legal fees for issue of
shares. ii Prepare Red's consolidated balance sheet as at August Year
tableRed Corp.Consolidated Balance Sheet,August Year Assets
c Assume the same facts as part b except that Red is a private company, uses ASPE, and chooses to use the cost method to account for its investment in Sax.
i Prepare the journal entries in the records of Red to record the share acquisition and related fees. If no entry is required for a transactionevent select No Journal Entry Required" in the first account field.A Record the acquisition of shares from Sax for $
B Record the $ cash paid for professional fees
expense and $ paid for legal fees for issue of
shares.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started