The following are summarized statements of financial position of three companies as at December 31, Year 3:
Question:
The fair values of the identifiable assets and liabilities of the three companies as at December 31, Year 3, were as follows:
On January 2, Year 4, Company X will purchase the assets and assume the liabilities of Company Y and Company Z. It has been agreed that Company X will issue common shares to each of the two companies as payment for their net assets as follows:
To Company Y13,500 shares
To Company Z12,000 shares
The shares of Company X traded at $15 on December 31, Year 3.
Company X will incur the following costs associated with this acquisition:
Costs of registering and issuing shares ......... $12,000
Other professional fees associated with the takeover ... 30,000
$42,000
Company Y and Company Z will be wound up after the sale.
Required:
(a) Prepare a summarized pro forma statement of financial position of Company X as at January 2, Year 4, after the purchase of net assets from Company Y and Company Z.
(b) Prepare the pro forma statements of financial position of Company Y and Company Z as at January 2, Year 4, after the sale of net assets to Company X and prior to being wound up.
Step by Step Answer:
Modern Advanced Accounting In Canada
ISBN: 9781259066481
7th Edition
Authors: Hilton Murray, Herauf Darrell