Assignment 1
Problem 1
Pre-Contribution Balance Sheets and Fair Values
June 30, 20X9
(in thousands of $)
Swag Co. Perk Ltd.
Pre-
Contribution
Fair
Value
Pre-
Contribution
Fair
Value
Assets:
Cash and cash equivalents
1,645
1,645
840
840
Accounts receivable
1,400
1,400
1,260
1,260
Land
3,500
5,950
–
–
Building (net)
9,450
7,700
5,880
7,700
Equipment (net)
420
525
2,170
2,800
Total assets
16,415
10,150
Liabilities and
shareholders’ equity:
Accounts payable
455
455
770
770
Long-term debt
1,400
1,400
700
630
Total liabilities
1,855
1,470
Common shares
10,500
4,865
Retained earnings
4,060
3,815
Total shareholders’ equity
14,560
8,680
Total liabilities and
shareholders’ equity
16,415
10,150
Swag Co. acquired Perk on June 30, 20X9. Both companies have June 30 year-ends. Before the combination, Swag and Perk had, respectively, 840,000 and 525,000 common shares, issued and outstanding.
Required:
Prepare Swag’s consolidated balance sheet under each of the following independent situations:
a) Swag purchased the assets and assumed the liabilities of Perk by paying $1,400,000 in cash and issuing a $12,600,000 note.
b) Swag issued 280,000 common shares in exchange for all of Perk’s outstanding shares. The fair value of the Swag shares was $14,000,000. c) In exchange for all of Perk’s outstanding shares, Swag paid $700,000 cash and issued 189,000 common shares with a market value of $9,450,000.
Problem 2
Balance Sheets
December 31, 20X3
Green Tower
Ltd.
Blue Loft
Ltd.
Assets:
Current assets:
Cash
$ 156,000
$ 143,000
Accounts receivable
195,000
175,500
Inventory
312,000
253,500
Total current assets
663,000
572,000
Land
923,000
–
Equipment
897,000
1,183,000
Accumulated amortization
(663,000)
(416,000)
Investment in Blue Loft
1,409,200
–
Goodwill*
98,800
__-____
Total assets
3,328,000
1,339,000
Liabilities and shareholders’…