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Compute the consolidated cash upon completion of the acquisition

A)  $1,350.

B)  $1,110.

C)  $1,080.

D)  $1,085.

E)  $    635.

Answer: D

Learning Objective: 02-05

Learning Objective: 02-06a 

Learning Objective: 02-06b

Learning Objective: 02-07

Topic: Costs of combination

Topic: Acquisition―Calculate consolidated balances

Topic: Consolidation worksheet

Difficulty: 2 Medium  

Blooms: Apply

AACSB: Knowledge Application

AICPA: BB Critical Thinking

AICPA: FN Measurement

Feedback: Cash of Parent + Cash of Subsidiary – (Post-Transaction Costs + Post-Transaction Expenses) = $870 + $240 –($15 + $10) =  $870 + $240 – $25 = $1,085

REFERENCE: 02-08

Flynn acquires 100 percent of the outstanding voting shares of Macek Company on January 1, 2018.  To obtain these shares, Flynn pays $400 cash (in thousands) and issues 10,000 shares of $20 par value common stock on this date.  Flynn’s stock had a fair value of $36 per share on that date.  Flynn also pays $15 (in thousands) to a local investment firm for arranging the acquisition.  An additional $10 (in thousands) was paid by Flynn in stock issuance costs.

The book values for both Flynn and Macek as of January 1, 2018 follow.  The fair value of each of Flynn and Macek accounts is also included.  In addition, Macek holds a fully amortized trademark that still retains a $40 (in thousands) value.  The figures below are in thousands.  Any related question also is in thousands.


Flynn, Inc

.


Macek Company




Book Value


Fair Value


Cash


$   900


$  80


$ 80


Receivables


     480


  180


 160


Inventory


     660


  260


 300


Land


     300


  120


 130


Buildings (net)


  1,200


  220


 280


Equipment


     360


  100


   75


Accounts payable


     480


    60


   60


Long

term liabilities


  1,140


  340


 300


Common stock


  1,000


    80



Additional paid-in capital
Retained earnings


     200
  1,080


      0
  480




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