Palm Corporation and Staple Company have announced terms of an exchange agreement under which Palm will issue 8,500 shares of its $15 par value common stock to acquire all of Staple Company’s assets. Palm shares currently are trading at $59, and Staple $10 par value shares are trading at $23 each. Historical cost and fair value balance sheet data on January 1, 20X2, are as follows: Palm Corporation Staple Company Balance Sheet Item Book Value Fair Value Book Value Fair Value Assets Cash & Receivables $ 151,000 $ 151,000 $ 46,000 $ 46,000 Land 110,000 190,000 57,000 83,000 Buildings & Equipment (net) 313,000 411,000 176,000 230,000 Total Assets $ 574,000 $ 752,000 $ 279,000 $ 359,000 Equities Common Stock $ 200,000 $ 81,000 Additional Paid-In Capital 18,000 9,900 Retained Earnings 356,000 188,100 Total Equities $ 574,000 $ 279,000 Required: What amount will be reported immediately following the business combination for each of the following items in the combined company’s balance sheet? a.Common Stock b.Cash and Receivables c.Land d.Buildings and Equipment (net) e.Goodwill f.Additional paid-In Capital g.Retained Earnings

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter15: Contributed Capital

Section: Chapter Questions

Problem 1MC

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Question

Palm Corporation and Staple Company have announced terms of an exchange agreement under which Palm will issue 8,500 shares of its $15 par value common stock to acquire all of Staple Company’s assets. Palm shares currently are trading at $59, and Staple $10 par value shares are trading at $23 each. Historical cost and fair value balance sheet data on January 1, 20X2, are as follows:

	Palm Corporation		Staple Company
Balance Sheet Item	Book Value	Fair Value		Book Value	Fair Value
Assets
Cash & Receivables	$	151,000		$	151,000	$	46,000	$	46,000
Land		110,000			190,000		57,000		83,000
Buildings & Equipment (net)		313,000			411,000		176,000		230,000
Total Assets	$	574,000		$	752,000	$	279,000	$	359,000
Equities
Common Stock	$	200,000				$	81,000
Additional Paid-In Capital		18,000					9,900
Retained Earnings		356,000					188,100
Total Equities	$	574,000				$	279,000

Required:
What amount will be reported immediately following the business combination for each of the following items in the combined company’s balance sheet?

a.Common Stock

b.Cash and Receivables

c.Land

d.Buildings and Equipment (net)

e.Goodwill

f.Additional paid-In Capital

g.Retained Earnings

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