1
Acquisition
It is a process under which one company buysmajority of shares of another company and gains the control of the other company.
One reason for which company A purchased majority of shares of company T and the benefit of this acquisition to company A.
2
Purchase consideration
Purchase consideration represents the amount that purchasing company pays to the acquired company in exchange of the assets and liabilities.
The amount of consideration in the acquisition of company T by company A.
3
Purchase consideration
Purchase consideration represents the amount that purchasing company pays to the acquired company in exchange of the assets and liabilities.
How purchase consideration was satisfied in the given acquisition case.
4
Acquisition
It is a process under which one company buysmajority of shares of another company and gains the control of the other company.
The type of acquisition that would describe the given case of acquisition.
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Advanced Financial Accounting
- On August 27, 2015, Celgene Corporation acquired all of the outstanding stock of Receptos, Inc., in exchange for $7.6 billion in cash. Referring to Celgene's 2015 financial statements and its July 14, 2015, press release announcing the acquisition, answer the following questions regarding the Receptos acquisition. How will Celgene account for the in-process research and development product rights acquired in the Receptos combination?arrow_forwardAcquisition of Cats Rule: On January 1, 2019, Buddy Dog Food Company acquired Cats Rule Food Company for $3,000,000 cash and 2,500,000 shares of Buddy, $5 par common stock which had a fair value of $12 per share on 1/1/19. These amounts were paid to acquire all of the shares of Cats Rule Food Company. Buddy immediately delisted those shares and decided to treat the acquisition as a merger. Buddy also has agreed to pay the stockholders additional compensation based upon the realized Cats Rule EBITDA over the first 3 years that Buddy owns Cats Rule. The compensation will be 10% of the excess of the 3-year cumulative EBITDA over $2,000,000. A discount rate of 10% is reasonable. The probability distribution that Buddy has estimated for Cats Rule’s cumulative EBITDA is: 3 year Cumulative EBITDA Probability $1,000,000 .3 $2,100,000 .2 $3,000,000 .4 $5,000,000 .1 Other information about the acquisition: The 1/1/19 Buddy’s balance sheet before the acquisition is recorded and Cats Rule balance…arrow_forwardOn August 27, 2015, Celgene Corporation acquired all of the outstanding stock of Receptos, Inc., in exchange for $7.6 billion in cash. Referring to Celgene's 2015 financial statements and its July 14, 2015, press release announcing the acquisition, answer the following questions regarding the Receptos acquisition. What accounting method was used, and for what amount, to record the acquisition?arrow_forward
- Choose the correct. What is a statutory merger?a. A merger approved by the Securities and Exchange Commission.b. An acquisition involving the purchase of both stock and assets.c. A takeover completed within one year of the initial tender offer.d. A business combination in which only one company continues to exist as a legal entity.arrow_forwardOn August 27, 2015, Celgene Corporation acquired all of the outstanding stock of Receptos, Inc., in exchange for $7.6 billion in cash. Referring to Celgene's 2015 financial statements and its July 14, 2015, press release announcing the acquisition, answer the following questions regarding the Receptos acquisition. What amount did Celgene include in pre-combination service compensation in the total consideration transferred? What support is provided for this treatment in the Accounting Standards Codification (see ASC 805-30-30, paragraphs 9-l3)?arrow_forwardThe balance sheets of Cat company and Rat company as of January 1, 2019 are presented below. On that date, after extended period of negotiation, the companies agreed to merge all assets Cat Rat Cash 50.000 20,000 Receivable 80,000 20,000 Inventories 200,000 200,000 Plant and Equipment (net) 20,000 60,000 Total Assets 350,000 300.000 Calculate total net assets of alter merger. Select one: a. OMR 50,000 b. OMR 350,000 c. OMR 300,000 d. OMR 650,000arrow_forward
- On August 27, 2015, Celgene Corporation acquired all of the outstanding stock of Receptos, Inc., in exchange for $7.6 billion in cash. Referring to Celgene's 2015 financial statements and its July 14, 2015, press release announcing the acquisition, answer the following questions regarding the Receptos acquisition. Why did Celgene acquire Recentos?arrow_forwardTransWorld Communications Inc., a large telecommunications company,is evaluating the possible acquisition of Georgia Cable Company (GCC), a regionalcable company. TransWorld’s analysts project the following post-merger data for GCC (inthousands of dollars): If the acquisition is made, it will occur on January 1, 2018. All cash flows shown in the incomestatements are assumed to occur at the end of the year. GCC currently has a capital structureof 40% debt, but Trans World would increase that to 50% if the acquisition were made. GCC,if independent, would pay taxes at 20%, but its income would be taxed at 35% if it wereconsolidated. GCC’s current market-determined beta is 1.40, and its investment bankersthink that its beta would rise to 1.50 if the debt ratio were increased to 50%. The cost of goodssold is expected to be 65% of sales, but it could vary somewhat. Depreciation-generatedfunds would be used to replace worn-out equipment, so they would not be available toTransWorld’s…arrow_forwardOn August 27, 2015, Celgene Corporation acquired all of the outstanding stock of Receptos, Inc., in exchange for $7.6 billion in cash. Referring to Celgene’s 2015 financial statements and its July 14, 2015, press release announcing the acquisition, answer the following questions regarding the Receptos acquisition.1. Why did Celgene acquire Receptos?2. What accounting method was used, and for what amount, to record the acquisition?3. What amount did Celgene include in pre-combination service compensation in the total consideration transferred? What support is provided for this treatment in the Accounting Standards Codification (see ASC 805-30-30, paragraphs 9-13)?4. What allocations did Celgene make to the assets acquired and liabilities assumed in the acquisition? Provide a calculation showing how Celgene determined the amount allocated to goodwill.5. Describe the nature of the in-process research and development product rights acquired by Celgene in its acquisition of Receptos.6. How…arrow_forward
- What are the accounting ramifications of each of the three following situations involving the payment of contingent consideration in an acquisition? a. P Company issues 100,000 shares of its $50 fair value ($1 par) common stock as payment to buy S Company on January 1, 2015. P agrees to pay $100,000 cash two years later if S income exceeds an income target. The target is exceeded. b. P Company issues 100,000 shares of its $50 fair value ($1 par) common stock as payment to buy S Company on January 1, 2015. P agrees to issue 10,000 additional shares of its stock two years later if S income exceeds an income target. The target is exceeded. c. P Company issues 100,000 shares of its $50 fair value ($1 par) common stock as payment to buy S Company on January 1, 2015. P agrees to issue 5,000 additional shares two years later if the fair value of P shares falls below $50 per share. Two years later, the stock has a fair value below $50, and added shares are issued to S.arrow_forwardIn 2021, Google, a company that specializes in internet-related service, acquired Fitbit, the fitness tracking company, to bolster its wearable capabilities. Google paid shareholders $7.25 per share in cash. This is an example of which of the following? Group of answer choices horizontal acquisition conglomerate acquisition vertical acquisition mergerarrow_forwardBMW Motors Corp. wants to acquire all the assets of MWB Corp. BMW plans to pay for the assets by issuing its own corporate stock. BMW’s board of directors has already approved the merger. In what circumstances would the approval of BMX’s shareholders be required for this merger?Is the approval of MWB’s shareholders necessary? Explain.arrow_forward
- Financial Reporting, Financial Statement Analysis...FinanceISBN:9781285190907Author:James M. Wahlen, Stephen P. Baginski, Mark BradshawPublisher:Cengage LearningEBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT