Chapter 2 Homework Note Unless otherwise stated, all problems assume that the acquisition method is to be used. Pleae 1 Rollins acquires 100 % of the voting common shares of Baxter on January 1, 2010 in a transarti structured as a statutory merger. The terms of the transaction are that Baxter's shareholders will receive 1 share of Rollin's common stock for each 2 shares of Baxter stock outstanding, the date of acquisition, there are 300,000 shares of Baxter's stock outstanding and 2,000,000 shares of Rollin's stock outstanding. At date of acquisition, the par value of Rollin's stock is $1 show all supporting calculations on your homework submission. and the fair value is $30 and the par value of Baxter stock is $2 and the fair value is $14. a. Prepare the journal entry to be recorded by Rollins to reflect this acquisition b. Assume that in addition to the above, Rollins pays 5500,000 to its attorneys to structure the deal and $200,000 to its accountants to assist in preparing consolidated financial statements. Prepare the iournal entry on Rallins books to reflect this. Same facts as in b. above except the acquisition was done on January 1, 2008. Prepare the C. journal entry on Rollins books to reflect this. d. Rollins pays $600,000 to underwriters and the stock exchange in consideration of the new shares of stock to be issued in the transaction. Prepare the journal entry on Rollins books to reflect this e. Same facts as in d, above except that the acquisition was done on January 1, 2008. Prepare the journal entry on Rollins books to reflect this. Do the answers to the above a, b, ., d and e above differ if the transaction was structured as either a statutory consolidation or an acquisition? f Chaney acquires 100 % of the voting shares of Roberts on January 1, 2010 in a transaction structured as an acquisition. Assume that using the acquisition method, goodwill of $2,000,000 resulted. In addition to the initial payment to Roberts shareholders, Chaney agrees that if in 2 years, Roberts earnings increase by 40 % , Chaney will pay an additional $500,000 to Roberts shareholders. At the date of acquisition, the probability of meeting this earnings target is 2 viewed as 70 %. Prepare the journal entry to be recorded by Chaney on January 1, 2010 (you may ignore the a. time value of money). b. Assume that at the end of 2012, Roberts earnings have increased by 50 % , What entry is recorded by Chaney at that time. Assume that at the end of 2012, Roberts earnings have increased by 30 %. What entry is C. recorded by Chaney at that time. Note: The text has a detailed discussion on contingent consideration in chapter 3 of the text on pages