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Shares and Stock When Acquiring Assets

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.

Solution Summary

Shares and stocks when acquiring assets are examined.

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