| The information below is for P Corp (the investor) and S Corp (the investee) at the close of business for Dec 31 2017 (23 hrs 59 mins 59 secs). The traded market value at the market close for Dec 31 was $35 and $31 per share for P and S, respectively. | | Book Values | | Fair Values | | | | P Corp | S Corp | | P Corp | S Corp | | | Receivables and Inventories | 100,000 | 50,000 | | 90,000 | 45,000 | | | Land | 200,000 | 100,000 | | 300,000 | 150,000 | | | PPE (net) | 225,000 | 100,000 | | 250,000 | 130,000 | | | Trademarks and Patents | - | - | | 150,000 | 80,000 | | | Total Assets | 525,000 | 250,000 | | 790,000 | 405,000 | | | Liabilities | 150,000 | 80,000 | | 180,000 | 95,000 | | | Common Stock ($1 par) | 20,000 | 10,000 | | | | | | APIC | 280,000 | 150,000 | | | | | | Retained Earnings | 75,000 | 10,000 | | | | | | Total Liabilities and Equity | 525,000 | 250,000 | | | | | | | | | | | | | | Net Assets | 375,000 | 170,000 | | 610,000 | 310,000 | | | | | | | | | | | | | | REQ#1. Assume that on Jan 01 2018 (00 hrs 00 mins 01secs), P Corp. issued 9,500 new shares of its stock in exchange for all the individually identifiable assets and liabilities of S Corp. This is a business combination viewed as a 'net-asset acquisition'. Note that the financial accounting information provided above was prepared immediately before the acquisition. Provide the balances of each and every account on P's books immediately after its acquisition of S Corp. | REQ#2. Now assume that on Jan 01 2018 (00 hrs 00 mins 01secs), P Corp. issued 9,500 new shares of its stock in exchange for all the common stock of S Corp. This is a business combination viewed as a 'stock acquisition'. Note that the financial accounting information provided above was prepared immediately before the acquisition. Provide the balances of each and every account on P's books immediately after its acquisition of S Corp. | Continue to assume the business combination is a 'stock acquisition' as in REQ#2. For 2018 (2019), S Corp reported net income of $15,000 ($22,000) and paid dividends of $5,000 ($6,000). For equity method accounting, the additional depreciation on the builidings for the $30,000 difference between book value and acquisition-date fair value is $3,000 per year. | REQ#3. (a) For S Corp, calculate its total stockholder's equity on 12/31/2019. (b) For P Corp, calculate the balance of its account, Investment in S Corp (equity method), on 12/31/2019. (c.) Reconcile the difference between S's stockholder's equity and P's investment account. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
