Answered step by step
Verified Expert Solution
Question
1 Approved Answer
On January 2, 20X8, Primary Corporation acquired 100 percent of Secondary Company's outstanding common stock. In exchange for Secondary's stock, Primary issued bonds payable
On January 2, 20X8, Primary Corporation acquired 100 percent of Secondary Company's outstanding common stock. In exchange for Secondary's stock, Primary issued bonds payable with a par and fair value of $650,000 directly to the selling stockholders of Secondary. The two companies continued to operate as separate entities subsequent to combination. Immediately prior to the combination, the book values and fair values of the companies' assets and liabilities were as follows: Cash Receivables Allowance for Bad Debts Inventory Land Buildings and Equipment Accumulated Depreciation Patent Total Assets Current Payables Bonds Payable Common Stock Additional Paid-In Capital Retained Earnings Total Liabilities & Equity Primary Corporation Book Value $ 12,000 41,000 (2,000) 86,000 55,000 960,000 (411,000) $ 741,000 Fair Value Secondary Company Book Value $ 12,000 39,000 $ 9,000 Fair Value $ 9,000 31,000 30,000 (1,000) 89,000 72,000 200,000 50,000 70,000 650,000 670,000 (220,000) 500,000 $990,000 $ 38,000 200,000 $ 38,000 210,000 300,000 100,000 103,000 $ 741,000 68,000 $ 607,000 $ 29,000 100,000 40,000 $721,000 $ 29,000 90,000 200,000 130,000 148,000 $ 607,000 At the date of combination, Secondary owed Primary $6,000 plus accrued interest of $500 on a short-term note. Both companies have properly recorded these amounts.
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