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    Shares and Stock When Acquiring Assets

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    Bar Corporation has been looking to expand its operations and has decided to acquire the assets of Vicker Company and Kendal Company. Bar will issue 30,000 shares of its $10 common stock to acquire the net assets of Vicker Company and will issue 15,000 shares to acquire the net assets of Kendal Company.

    Vicker has the following balance sheets as of December 31, 2011:
    Assets:
    Account Receivable $200,000
    Inventory $150,000
    Land $150,000
    Buildings $500,000
    Accumulated Depreciation $150,000
    Liabilities & Equity:
    Current Liabilities $160,000
    Bonds Payable $100,000
    Stockholders Equity:
    Common Stock ($10 par) $300,000
    Retained Earnings $150,000
    Total liabilities and equity $850,000

    Total Assets $850,000

    Kendal has the following balance sheets as of December 31, 2011:
    Assets:
    Accounts Receivable $80,000
    Inventory $85,000
    Land $50,000
    Buildings $300,000
    Accumulated Depreciation $110,000
    Liabilities & Equity:
    Current Liabilities $55,000
    Bonds Payable $100,000
    Stockholders Equity:
    Common Stock ($10 par) $100,000
    Retained Earnings $150,000
    Total liabilities and equity $405,000

    The following fair values are agreed upon by the firms:
    Vicker
    Assets:
    Inventory $190,000
    Land $300,000
    Buildings $450,000
    Bonds Payable $90,000

    Kendal
    Assets:
    Inventory $100,000
    Land $80,000
    Buildings $400,000
    Bonds Payable $95,000

    Bar's stock is currently trading at $40 per share. Bar will incur $5,000 of acquisition costs in acquiring Vicker and $4,000 of acquisition costs in acquiring Kendal. Bar will also incur $15,000 of registration and issuance costs for the shares issued in both acquisitions.

    Bar's stockholders equity is as follows:
    Common Stock ($10 par) $1,200,000
    Paid-in capital in excess of par $800,000
    Retained Earnings $750,000

    Record the acquisitions on the books of Bar Corporation. Value analysis is suggested to guide your work.

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    Solution Summary

    Shares and stocks when acquiring assets are examined.

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