PROBLEM $2-2$

Merger and Consolidation, Goodwill Impairment LO $3LO{6}_{?}$

Stockholders of Acme Company, Baltic Company, and Colt Company are considering alternative arrangements for a business combination. Balance sheets and the fair values of each company's assets on October $1,2024,$ were as follows:

$\backslash$table$[[,$Acme,Baltic,Colt$],[$Assets$,$$$3,900,000,$$$7,500,000,$$ $950,000],[$Liabilities$,$$$2,030,000,$$$2,200,000,$$ $260,000],[$Common stock, $$20$ par value,$2,000,000,1,800,000,540,000],[$Other contributed capital,$-0-,600,000,190,000],[$Retained earnings $($deficit$),\_\_(130,,2,900,000\_,-(40,000).],[$Total equities,$$3,900,000,$$$7,500,000,$$ $950,000],[$Fair values of assets,$$4,200,000,$$$9,000,000,$$$1,300,000]]$

Acme Company shares have a fair value of $$50.$ A fair $($market$)$ price is not available for shares of the other companies because they are closely held. Fair values of liabilities equal book values.

Required:

A$.$ Prepare a balance sheet for the business combination. Assume the following: Acme Company acquires all the assets and assumes all the liabilities of Baltic and Colt Companies by issuing in exchange $140,000$ shares of its common stock to Baltic Company and $40,000$ shares of its common stock to Colt Company.